(L.OBJ. 2) Accounting for warranty expense and warranty payable [10 min]
Catskills Corporation guarantees its snowmobiles for three years. Company experience indicates that warranty costs will add up to 5% of sales.
Assume that the Catskills dealer in Colorado Springs made sales totaling $519,000 during 2011. The company received cash for 20% of the sales and notes receivable for the remainder. Warranty payments totaled $19,000 during 2011.
Requirements
1. Record the sales, warranty expense, and warranty payments for the company.
2. Post to the Estimated warranty payable T-account. At the end of 2011, how much in Estimated warranty payable does the company owe?
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