Question

What is the total estimated warranty expense for 2 years ago? 3. What is the estimated warranty expense that Arctica reports for its Jag model for the current year? 2. Total estimated warranty expense for 2 years ago 3. Estimated warranty expense (Jag model) for the current year

Answer 1

Answer and Explanation:

As given in the question, percentage of estimated warranty expense is 4% of Lynx, 7% of Puma and 6% of Jag sales.

Therefore, estimated warranty expense for the current year for Arctica will be:

4% × 80000 = 3200

7% × 60000 = 4200

6% × 105000 = 6300

Total 13700

2. Adjusting entry:

Warranty expense    Dr. 13700

To Warranty expense Liability     13700

( Being estimated liability recorded)

3. Warranty Expense Liability   Dr. 700

To Inventory     700

( Being replacement cost recorded)