Question

Cullumber Manufacturing sells its products with a 75-day warranty for defective merchandise. Based on past experience, Cullumber estimates that 3% of the units sold will become defective during the warranty period. Management estimates that the average cost of replacing or repairing a defective unit is NT$13 (amounts in thousands). The units sold and units defective that occurred during the last 2 months of 2020 are as follows. Month Units Sold Units Defective Prior to December 31 630 November December 28,000 33,500 360 - Your answer is partially correct. Prepare the journal entries to record the provision for warranties and the costs incurred in honoring 990 warranty claims. (Assume actual costs of NT$15,000 and expenditures are for repair costs.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit Warranty Expense 12870 Repair Parts 12870 (To record provision for warranties) Warranty Expense 23985 Warranty Liability 23985 (To record honoring of warranty contracts)

Answer 1

To record provision of warranties

Warranty Expense Debit - 12870

To Provision for Warranties Credit 12870

To record honoring of warranty contracts

Provision for Warranties Debit 15000

To Vendors Credit 15000