Answer:
1.Warranty expense
$ 750
2.Estimated warranty liability
$ 750
3. Warranty Expense $ 0
4.
Estimated warranty liability
$ 626
5. Hitzu Co. Journal entries
Aug 16
Dr Cash 15,000
Cr Sales 15,000
Aug 16
Dr Cost of goods sold 7500
Cr Merchandise inventory 7500
Dec 31
Dr Warranty expense 750
Cr Estimated Warranty liability 750
Dec 31
Dr Estimated warranty liability 124
Cr Repair part inventory 124
Explanation:
1.
Warranty expense 5% of dollar sales
= 5% × $15,000 = $750.
2.
The December 31, 2017, balance of the liability equals the expense because no repairs are provided in 2017. Therefore, the ending balance of the Estimated Warranty Liability account is $750.
3.
The company should report no additional warranty expense in 2018 for this copier.
4.
The December 31, 2018, balance of the Estimated Warranty Liability account equals the 2016 beginning balance minus the costs incurred in 2018to repair the copier:
Beginning 2016 balance $ 750
Less parts cost (124)
Ending 2018 balance $626
