Question

Exercise 9-10 Warranty expense and liability computations and entries LO P4 Hitzu Co. sold a copier costing $5,500 with a two year parts warranty to a customer on August 16, 2018, for $11,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2019, the copler requires on-site repairs that are completed the same day. The repairs cost $124 for materials taken from the repair parts inventory. These are the only repairs required in 2019 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjusting entry at the end of each year. 1. How much warranty expense does the company report in 2018 for this copler? 2. How much is the estimated warranty liability for this copier as of December 31, 2018? 3. How much warranty expense does the company report in 2019 for this copler? 4. How much is the estimated warranty liability for this copier as of December 31, 20197 5. Prepare journal entries to record (d) the copier's sale: (b) the adjustment on December 31, 2018, to recognize the warranty expense; and the repairs that occur in November 2019 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 How much warranty expense does the company report in 2019 for this copler? Warranty expense Required 2 Required 4 >

Answer 1

	1
	Warranty expense	440	=11000*4%
	2
	Estimated warranty liability	440
	3
	Warranty expense	0
	4
	Estimated warranty liability	316	=440-124
5
Date	General Journal	Debit	Credit
Aug. 16, 2018	Cash	11,000
	Sales		11,000
Aug. 16, 2018	Cost of goods sold	5,500
	Merchandise inventory		5,500
Dec 31,2018	Warranty expense	440
	Estimated warranty liability		440
Nov. 22, 2019	Estimated warranty liability	124
	Repair parts inventory		124