Question

Wildhorse Co. sells remote control airplane engines, which carry a one-year warranty. If a customer brings in a defective engine, he replaces the engine with a new one from his inventory. Wildhorse estimates that 2% of units sold will be defective. As at January 1, the Warranty Liability had a credit balance of $400.

Wildhorse provided the following information for his year end of December 31.

Cost per engine $145

Total sales 1,070 units

Actual warranty costs $1,160

Calculate the estimated warranty expense for the year.

Estimated warranty expense $

List of Accounts

  

Prepare the journal entry for the estimated warranty expense for the year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

List of Accounts

  

Prepare the journal entry to record the actual warranty costs for the year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

List of Accounts

  

Calculate the ending balance in the warranty liability account at the end of the year.

Ending balance in warranty liability account $

List of Accounts

  

If Wildhorse fixed an engine himself instead of replacing it with a new engine, what account would be credited instead of Merchandise Inventory?

If Wildhorse fixed an engine himself instead of replacing it with a new engine, the

account would be credited instead of the Merchandise Inventory account.

Answer 1