Question

Co. was organized to sell a single product that carries a​ 45-day warranty against defects. Engineering estimates indicate that ​% of the units sold will prove defective and require an average repair cost of per unit. During ​'s first month of​ operations, total sales were ​units; by the end of the​ month, defective units had been repaired. The liability for product warranties at​ month-end should be

Answer 1

Answer:

$660 (credit balance)

Explanation:

the question is missing the numbers, so I looked for a similar one:

• 4% of units will be defective
• average repair cost of $20
• 1,100 units sold during the first month
• 11 defective units were repaired

The journal entry to record warranty liability:

Dr Warranty expense 880

    Cr Warranty liability 880

the journal entry to record actual money spent repairing defective units:

Dr Warranty liability 220

    Cr Cash 220

the balance of the warranty liability account at the end of the month = $880 - $220 = $660