Classic Sales Company offers warranties on all their electronic goods. Warranty expense is...
Question:
Classic Sales Company offers warranties on all their electronic goods. Warranty expense is estimated at? 3% of sales revenue. In 2018, the company had $602,000 of sales. In the same year, it paid out $12,000 of warranty payments.
Provide the entry needed to record the estimated warranty expense.
Warranty Expense:
Warranty is an obligation of a company often provided as an after-sales service. When companies provide warranty service, a warranty liability is to be recorded in the books of account in the year of related sales.
Answer and Explanation: 1
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Journal entry to record estimated warranty expense:
| Date | Account Titles and Explanation | Debit | Credit |
|---|---|---|---|
| Dec 31, 2018 | Warranty expense | $18,060... |
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Recording Warranty and Service Costs
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Chapter 7 / Lesson 5
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Explore ways businesses record, calculate, and account for warranty and service costs. Examine what warranty and service costs are, discover methods of finding expense percentages and how to assign the costs to an account, and view an example.
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