Question

Trail Runner USA, a tire manufacturer, guarantees its tires against defects for five years or 60,000 miles, whichever comes first. Suppose Trail Runner USA can expect warranty costs during the five-year period to add up to 4 % of sales. Assume that a Trail Runner USA dealer in Denver, Colorado, made sales of $475,000 during 2018. Trail Runner USA received cash for 30 % of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totaled $18,800 during 2018. Read the requirements 1. Record the sales, warranty expense, and warranty payments for Trail Runner USA. (Record debits first, then credits. Exclude explanations from any journal entries.) First, let's record the sale of the tires Journal Entry Debit Credit Accounts Choose from any list or enter any number in the input fields and then click Check Answer

Answer 1

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Part 1
Event	Account	Debit	Credit
1	Cash ($475,000*30%)	$                            142,500
	Note Receivable ($475,000*70%)	$                            332,500
	Sale		$   475,000
	(To record sale)
2	Warranty Expense ($475,000*4%)	$                              19,000
	Accrued Warranty Payable		$      19,000
	(To record warranty expense)
3	Accrued warranty Payable	$                              18,800
	Cash		$      18,800
	(To record warranty payment)
Part 2
Debit		Credit
3	$                                                                                  18,800	Beginning Balance	$      15,000
		2	$      19,000
		Ending Balance	$      15,200