Accounting for warranty expense and warranty payable [5-15 min]The accounting records of C...

Accounting for warranty expense and warranty payable [5-15 min]

The accounting records of Clay Ceramics included the following at January 1, 2012:

In the past, Clay’s warranty expense has been 8% of sales. During 2012, Clay made sales of $136,000 and paid $7,000 to satisfy warranty claims.

Requirements

1. Journalize Clay’s warranty expense and warranty payments during 2012. Explanations are not required.

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2. What balance of Estimated warranty payable will Clay report on its balance sheet at December 31, 2012?