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17 April, 14:50

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.

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  1. 17 April, 15:49
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    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
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