Ally Inc. begins production of a new machine in Nov. 2017 and sells 50 of these...
Ally Inc. begins production of a new machine in Nov. 2017 and sells 50 of these machines for $1000 (for each machine).
Each machine is under warranty for 1 year. Ally Inc. estimates, based on past experience, that the warrant cost will average the following per unit $100.
Further, as a result of parts replacements and services performed in compliance with machinery warranties, Ally Inc incurs the following warranty costs in 2017: $1111
Ally Inc incurs the following warranty costs in 2018: $1555
1. Record Ally inc's journal entry to account for sales alone (ignore warranties) in 2017, assuming Ally Inc received cash for all sales
2. Record Ally Inc's journal entry to accrue warranties based on Ally Inc's estimate
3. Record Ally Inc's journal entry for payment of warranties incurred in 2017
4. Record Ally Inc's journal entry for payment of warranties incurred in 2018
Homework Answers
| [1] | Cash and Bank A/c | 50000 | |
| To Sales A/c | 50000 | ||
| [2] | Warranty Expense A/c | 5000 | |
| To Accrued Warranty Liability A/c | 5000 | ||
| [3] | Accrued Warranty Liability A/c | 1111 | |
| To Cash and Bank A/c | 1111 | ||
| [4] | Accrued Warranty Liability A/c | 1555 | |
| To Cash and Bank A/c | 1555 |
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