Question

On 30 April 20X2, Neuman Ltd. sells a product to a customer for $600,000. The product carries a one-year assurance warranty. Neuman management estimates that the probable cost of fulfilling the warranty will be $50,000. Between 1 May and 31 December 20X2, the actual warranty cost was $20,000. On 31 December 20X2, management decides that the probable additional warranty cost will be no more than $13,000. Between 1 January and 30 April 20X3, the additional cost was $11,000. Required: 1. Prepare the entries concerning the sale and the warranty for 30 April 20X2 through 30 April 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Date	Account Title	Debit	Credit
April 30, 20X2	Accounts Receivable	600000
	Sales Revenue		600000
April 30, 20X2	Warranty Expense	50000
	Estimated Warranty Liability		50000
Dec 31, 20X2	Estimated Warranty Liability	20000
	Cash		20000
April 30, 20X3	Estimated Warranty Liability	11000
	Cash		11000
April 30, 20X3	Estimated Warranty Liability	19000
	Warranty Expense		19000