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Estimated warranty liability Quantas Industries sold $325,000 of consumer electronics during July under a nine-month warranty. The cost to repair defects under the warranty is estimated at 4.5% of the sales price. On November 11, a customer was given $220 cash under terms of the warranty. Journalize the entry to record (A) the estimated warranty expense on July 31 for July sales, and (B) the November 11 cash payment.

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Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
BuyFindarrow_forward

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Chapter 10, Problem 10.7BE
Textbook Problem
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Estimated warranty liability

Quantas Industries sold $325,000 of consumer electronics during July under a nine-month warranty. The cost to repair defects under the warranty is estimated at 4.5% of the sales price. On November 11, a customer was given $220 cash under terms of the warranty.

Journalize the entry to record (A) the estimated warranty expense on July 31 for July sales, and (B) the November 11 cash payment.

A.

To determine

Warranty: It is an agreement made by the company to provide guarantee against the defects in the products.

To Journalize: Estimated warranty expense on July 31.

Explanation of Solution

Working note:

Calculate the amount of warranty expense as below:

Warranty expense = Sales × Percent(%)=$325,000×4

B.

To determine

To Journalize: Warranty payments for the company.

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Chapter 10 Solutions

Corporate Financial Accounting
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