Question

Hitzu Co. sold a copier costing $4,800 with a two-year parts warranty to a customer on August 16, 2015, for $6,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2016, the copier requires on-site repairs that are completed the same day. The repairs cost $209 for materials taken from the Repair Parts Inventory. These are the only repairs required in 2016 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjusting entry at the end of each year.
How much warranty expense does the company report in 2014 for this copier?

How much is the estimated warranty liability for this copier as of December 31, 2014?

Prepare journal entry to record the copier

Answer 1

Answer:

warranty expense 240 debit

     warranty liability      240 credit

--to record expected warranty associate with the sale--

warranty liability    209 debit

   inventory                    209 credit

--to record 2016 warranty cost--

Explanation:

6,000 x 4% = 240

the warrnaty expense and warranty liability created for the 2014 sale