Question

The accounting records of EarthtoneCeramics included the following at January 1, 2016

:

 

Estimated Warranty Payable  4,000Beg. Bal.

 

In the past, Earthtone's  warranty expense has been 8 %of sales. During 2016, Earthtonemade sales of $ 175,000 and paid $ 9,000 to satisfy warranty claims.

 

Requirements

1. Journalize Earthtone's warranty expense and warranty payments during 2016

 

2. What balance of Estimated Warranty Payable will Earthtonereport on its balance sheet at December 31, 2016?

Answer 1

1. Journal entry

   Date	Account title   and Explanation	Debit	Credit
   2016	Warranty Expense	$14,000
   	Estimated warranty payable		$14,000
   	To record the   estimated of warranty on sales
   	Estimated warranty   payable	$9,000
   	Cash		$9,000
   	To record the payment   of warranty due

2. Estimated warranty payable December   31 2016
   Cash	$9,000	Beginning balance	$4,000
   		Warranty expense	$14,000
   Balance	$9,000
   		Balance	$9,000