(L.OBJ. 2) Accounting for warranty expense and warranty payable (5-15 min] The accounti...

(L.OBJ. 2) Accounting for warranty expense and warranty payable (5-15 min]

The accounting records of Earthtone Ceramics included the following at December 31, 2011:

In the past, Earthtone’s warranty expense has been 5% of sales. During 2012, Earthtone made sales of $115,000 and paid $4,000 to satisfy warranty claims.

Requirements

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

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