Question

McNight Industries completed the following transactions during 2018: (Click the icon to view the transactions.) Journalize the transactions. Explanations are not required. Round to the nearest dollar. (Record debits first, then credits. Exclude explanations from journal entries.) Nov. 1: Made sales of $52,000. McNight estimates that warranty expense is 6% of sales. (Record only the warranty expense.) Date Accounts Debit Credit Nov. 1

Answer 1

Solution:

Date	Journal	Debit	Credit
Nov 1	Warranty Expense	3,120
	Estimated warranty payable		3,120
Nov 20	Estimated warranty payable	1,600
	Cash		1,600
Dec 31	Vacation Benefits Expense	6,000
	Vacation Benefits Payable		6,000
Dec 31	Employee Bonus Expense	1,515
	Employee Bonus Payable		1,515

Workings:

1) Calculation of Warranty expense = $ 52,000 x 6% = $ 3,120

2) It is given that bonus is to calculated at 3% on net income after deducting the bonus,

So formula is Net income x ( rate / 100 + rate)

Calculation of employees bonus = $ 52,000 x (3 / 103) = $1,515