Question

Jumbo Sales Corporation offers warranties on all their electronic goods. Warranty expense is estimated at 3% of sales revenue. In 2013, the company had $595,000 of sales. In the same year, it paid out $8,500 of warranty payments. Prepare the journal entry for the warranty expense and the warranty payments.

Answer 1

Answer:

Warranty Expense  = $17,850

Estimated Warranty Payable = $17,850

Explanation:

given data

sale revenue = $595,000

Warranty expense = 3 % of sale revenue

paid out = $8,500

solution

we get here estimated warranty expenses that is

estimated warranty expenses = 3% of  sale revenue   ................1

estimated warranty expenses = 0.03 × $595000

estimated warranty expenses = $17850

so here journal entry record estimate warranty expenses are as

Title                                                              debit                   credit

warranty expenses                                     $17850              

warranty payable                                                                    $17850

and

journal entry to record warranty payments

Title                                                        debit                           credit

warranty payable                                  $8500

inventory                                                                                    $8500