Benson Builder Pty Ltd provides a 12-month warranty on building
work performed by the entity. On 1 January 2016, there was a credit
balance of $76,400 in its warranty provision account. During the
year ended 31 December 2016, Benson Builder Pty Ltd incurred
$81,700 servicing warranty claims. All of the warranty costs were
in the form of labour costs. During the year ended 31 December
2016, Benson Builder Pty Ltd’s revenue from building contracts was
$7,500,000. Warranty liabilities are estimated as 1% of building
revenue for the previous 12 months.
Prepare journal entries to record warranty claims during the period
and end-of-period adjustments to the warranty provision account.
(Hint: credit wages payable for the labour costs.)
Homework Answers
| Debit | Credit | |||
| 31 Dec. 2016 | Estimated Warranty liability | 81700 | ||
| Wages payable | 81700 | |||
| 31 Dec. 2016 | Warranty expense | 75000 | =7500000*1% | |
| Estimated Warranty liability | 75000 | |||
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Benson Builder Pty Ltd provides a 12-month warranty on building
work performed by the entity. On...
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Your answer is partially
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