Question

Recording and Reporting Warranties During 2020, Ward Company introduced a new product carrying a two-year warranty against defects, which is included in the selling price of the product. The estimated warranty costs are 2% of sales within the first 12 months following the sale and 4% in the second 12 months following the sale. Sales and actual warranty expenditures for the years ended December 31, 2020, and 2021 are: Actual Warranty Sales Expenditures 2020 $600.000 $9.000 2021 1.000.000 30,000 $1,600.000 530.000 a. At December 31, 2020, what would Ward report as estimated warranty liability on its balance sheet? CE b. Record the journal entries on December 31, 2020 Date Account Name Dr. Dec 31, 2020 . To accrue forward Dec 31, 2020 . To record actual warranty.costs c. At December 31, 2021, what would Ward report as estimated warranty liability on its balance sheet? $ Activate Windows

Answer 1

F Debit Credit 44000 44000 30000 30000 1 (A) Estimated warranty (B) Journal for 31 dec, 2021 2 Sales 2% 4% Date Particulars 3 2020 600000 12000 24000 31-Dec-20 Warranty expense 4 2021 1000000 20000 40000 Warranty liability 5 (Warranty expense accrued) 6 At 31 december, 2020 warranty liability should be $12000 7 Warranty liability 8 (B) Journal for 31 dec, 2020 Cash 9 Date Particulars Debit Credit (Actual warranty cost) 10 31-Dec-20 Warranty expense 12000 Warranty liability 12000 12 (Warranty expense accrued) 13 14 Warranty liability 9000 15 Cash 9000 16 (Actual warranty cost) 17 18 © On 31. december 2021, warranty liability should be 20000+24000= $44000 11 unw