Question

During august, boxer company sells $356,000 in merchandise that has a one year warranty. experience shows that warranty expenses average about 5% of the selling price. the warranty liability account has a credit balance of $12,800 before adjustment. customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs. the entry to record the estimated warranty expense for the month is:

Answer 1

The above answer can be explained as under -

The journal entry to record estimated warranty expense is -

Warranty Expense Dr. ............. $ 17,800

Estimated Warranty Liability .......... Cr. $ 17,800.

The estimated warranty liability is calculated on the basis of the credit sales of the year and percentage estimated. Here, the credit sales of the year is $ 356,000 and the estimated percentage is 5 % of credit sales. Thus, estimated warranty liability is = $ 356,000 $356000 X 5 % = 17,800$

Answer 2

The entries to record the estimated warranty fee for this month are:

The August Guarantee fee                                      $17,800

    Estimated Guarantee Guarantee for August                   $17,800

A value of $ 17,800 is obtained from calculations:

$ 356,000 x 5%

= $ 17,800.

Where $ 356,000 was obtained from company sales during August and 5% was the guarantee fee set by the company from the sale price.

Further Explanation

General Ledger is one part of the Accounting Cycle. Technically, a General Ledger is a book that contains a collection of historical transaction data contained in General Journals and Special Journals. The way to make a General Ledger is fairly simple.  

The ledger displays the history of transactions and financial balances in an accounting period. At the end of the period, the Ledger serves as a source of data for creating the company's financial statements.

Guarantees are programs that are often effective in increasing customer satisfaction. Customers feel calm about the guarantee, and trust in the company will also increase. However, the ability to increase customer satisfaction differs between product and manufacturing services. For products, the warranty is generally quite ordinary and because of that, the warranty program is only to compete with competitors. For service, the warranty can be a competitive tool in creating effective customer satisfaction.

Types of Guarantees

• Personal Guarantee. This is a guarantee given by an individual.
• Company Guarantee. This is a guarantee given by the company.

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Details

Grade: College

Subject: Business

keywords: General Ledger