Question

During june, vixen company sells $850,000 in merchandise that has a one year warranty. experience shows that warranty expenses average about 3% of the selling price. customers returned $14,000 of merchandise for warranty replacement during the month. the entry to record the estimated warranty provision at the end of the month is:

Answer 1

Answer:

Explanation:

The journal entry is shown below:

Warranty expense A/c Dr $25,500

        To Estimated warranty liability $25,500

(Being the estimated warranty provision is recorded)

The computation is shown below:

= Merchandise sale value × given percentage

= $850,000 × 3%

= $25,500

Simply we debited the warranty expense and credited the estimated warranty liability so that the correct posting can be done.