Asked by Jalon Williams on Jul 06, 2024
Verified
Florida Keys Construction installs swimming pools. It calculates that warranty obligations are 3% of sales. For the year just ending, Florida Keys' sales were $1,450,000. Previous quarterly entries debiting Warranty Expense totaled $28,700. Determine the estimated warranty expense for the year and make the journal entry necessary to bring the account to the needed balance.
Warranty Obligations
A company's legal responsibility to repair or replace defective products within a specified period.
Warranty Expense
It represents the cost associated with the repair or replacement of defective products under warranty.
Journal Entry
A record in the accounting journal that consists of a debit and credit entry and describes a business transaction.
- Understand how to calculate and record estimated warranty expenses and actual warranty work.
Verified Answer
AN
Ayesha NaeemJul 09, 2024
Final Answer :
Due to sales of $1,450,000, warranty liability is $43,500
($1,450,000 × 3%). Since $28,700 has already been recognized, $14,800
($43,500 - $28,700) must still be recognized. Dec. 3131 \quad31 Warranty Expense 14,800\quad 14,80014,800
\quad Warranty Payable \quad\quad 14,800
($1,450,000 × 3%). Since $28,700 has already been recognized, $14,800
($43,500 - $28,700) must still be recognized. Dec. 3131 \quad31 Warranty Expense 14,800\quad 14,80014,800
\quad Warranty Payable \quad\quad 14,800
Learning Objectives
- Understand how to calculate and record estimated warranty expenses and actual warranty work.