Hitzu Co. sold a copier costing $4,800 with a two-year parts
warranty to a customer on August 16, 2017, for $6,000 cash. Hitzu
uses the perpetual inventory system. On November 22, 2018, 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 2018 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.
1. How much warranty expense does the company
report in 2017 for this copier?
2. How much is the estimated warranty liability
for this copier as of December 31, 2017?
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| Estimated
warranty liability |
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3. How much warranty expense does the company
report in 2018 for this copier?
4. How much is the estimated warranty liability
for this copier as of December 31, 2018?
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| Estimated
warranty liability |
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5. Prepare journal entries to record (a) the
copier’s sale; (b) the adjustment on December 31, 2017, to
recognize the warranty expense; and (c) the repairs that occur in
November 2018.
1-Record the sale of a copier for $6,000 cash.
2-Record the cost of goods sold of $4,800.
3-Record the estimated warranty expense at 4% of the sales.
4-On November 22, 2018, the copier requires on- site repairs
that are completed the same day. The repairs cost $209 for
materials taken from the repair parts inventory. Record the cost of
the repair.
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Date |
General Journal |
Debit |
Credit |
| Nov 22, 2018 |
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