Question

U15 Ulsplayed below) W ence begins operations in 2021 and offers a one year warranty on all products sold. Total appliance sales in 2021 are $1,600,000, and Lindy estimates future warranty costs in 2022 to be 2% of current sales. Actual warranty costs in 2022 are $25,000. Also in 2022, Lindy has additional sales of $2,400,000 and revises its estimate of warranty costs associated with sales in 2022 to be 1.5%. equired: -3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, elect "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 Record the contingent liability for warranties for the year ending December 31, < Prix 8 9 of 10 !!! Next > O Rite 9 WOODFOREST

Answer 1

Credit Debit $32,000 Date General Journal 31/12/21 Warranty Expense ($1,600,000 * 20%) Estimated Warranty Liabilities (To record warranty expense ) $32,000 $25,000 31/12/22 Estimated Warranty Liabilities Inventory (if material used) / Cash / Wages Payable (To record warranty claims by Customers) $25,000 $29,000 31/12/22 Warranty Expense (see working) Estimated Warranty Liabilities (To record warranty expense ) $29,000 Less: $32,000 -$25,000 $7,000 Workings: Estimated warranty liability on 31/12/2021 Warranty claims by Chstomer Estimated warranty liability on 31/12/2021 before Adjustment Estimated warranty liability on 31/12/2022 before adjustment ($2,400,000 * 1.5%) Estimated warranty liability on 31/12/2021 before Adjustment Warranty expense for year 2022 Less: $36,000 $7,000 $29,000