ABC Co. sold 1,000 units of its vacuum cleaners for $20 each during 2019. It estimates...
ABC Co. sold 1,000 units of its vacuum cleaners for $20 each during 2019. It estimates that 30% of these vacuum cleaners will be repaired under warranty for an average of $5 each. In January of 2020, 35 of these units were repaired under warranty using $200 in repair parts. Record the journal entries to recognize warranty expense and for the repairs.
Homework Answers
Journal
| 2019 | Warranty expense | 1,500 | |
| Estimated warranty liability | 1,500 | ||
| January , 2020 | Estimated warranty liability | 200 | |
| Repair parts | 200 |
Estimated warranty liability = Estimated quantity to be repaired x Repair Cost per unit
= 1,000 x 30% x 5
= $1,500
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