Homework Answers
Answer-
a) Warranty expense $4,500 (Debit)
Warranty Liability $4,500 (Credit)
($450,000 * 1% = $4,500)
(Warranty expense recognised against warranty liabilty as per matching principal)
b) Warranty Liability $1,440 (Debit)
Cash and Payables $1,440 (Credit)
(Actual warranty costs realised against warranty liabilty)
It has been assumed that warranty costs has been paid in the form of cash.
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