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.

Question

Asher Little

Business

23 February, 22:17

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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Answers (1)

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Pittman · Answer 1

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