Journalizing liability transactions [20-25 min]
The following transactions of Brooks Garrett occurred during 2012:
Apr 30 | Garrett is party to a patent infringement lawsuit of $200,000. Garrett’s attorney is certain it is remote that Garrett will lose this lawsuit. |
Jun 30 | Estimated warranty expense at 2% of sales of $400,000. |
Jul 28 | Warranty claims paid in the amount of $6,000. |
Sep 30 | Garrett is party to a lawsuit for copyright violation of $100,000. Garrett’s attorney advises that it is probable Garrett will lose this lawsuit. |
Dec 31 | Garrett estimates warranty expense on sales for the second half of the year of $500,000 at 2%. |
Requirements
1. Journalize required transactions, if any, in Garrett’s general journal. Explanations are not required.
2. What is the balance in Estimated warranty payable?
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