Question

Jonus Bike Inc., manufactures and sells high-end bicycles. Each bicycle that the company sells comes with a 5 year unlimited warranty. Based on past experience, Jonus' accountant estimates that for every $4,000 worth of sales, Jonus will have to pay out $61 in warranty costs. Do not enter dollar signs or commas in the input boxes. a) This year, Jonus Bike Inc. had sales of $1,320,000. First, calculate the estimated warranty costs based on the accountant's analysis. Date Account Title and Explanation Debit Credit Dec 31 Warranty Expense 19800 X Estimated Warranty Liability : 19800 Record warranty liability b) As part of the warranty program, Jonus had to make repairs to the seat post of 19 bicycles that he sold, Jonus spent $1,280 cash. Prepare the journal entry to record this transaction Date Account Title and Explanation Debit Credit Dec 31 Estimated Warranty Liability • 24320 X Inventory • X 24320 X Record warranty repairs

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Dec. 31	Warranty expense           ( $ 1,320,000 x $ 61 / $ 4,000 )	20,130
	Estimated Warranty Liability		20,130
	(To record warranty laiblity)
Dec. 31	Estimated Warranty Liability	1,280
	Cash		1,280
	(To record warranty repairs)