Question

Jones Company’s balance reflected Estimated Warranty Payable of $1,000 credit at the end of 2018, the current year. During 2019, the following year, Jones had sales of $100,000 and expects product warranties to cost the company 9% of sales. During 2019, Jones paid $8,500 for warranties. What is Jones Estimated Warranty Payable balance at the end of 2019?

Answer 1

Answer: $1,500 credit balance

Explanation:From the question above, Jones company had a warranty payable balance of $1,000 carried forward from 2018.

During the year 2019, total sales was $100,00 with 9% warranty cost on sales valued at $100,000 @ 9% = $9000.

During the year a total of $8,500 was paid out of the $9,000 leaving a balance of $500.

At the end of the year 2019, Jones company will have $1,500 payable warranty balance in its books.