Question

Trail Runner guarantees its snowmobiles for three years. Company experience indicates that warranty costs will be approximately 5% of sales. Assume that the Trail RunnerTrail Runner dealer in Colorado Springs made sales totaling $600,000 during 2018.The company received cash for 20​% of the sales and notes receivable for the remainder. Warranty payments totaled $10,000 during 2018.

Read the requirements

.Requirement 1. Record the​ sales, warranty​ expense, and warranty payments for the company. Ignore cost of goods sold.

a) Begin with the entry to record the sales

Accounts and Explanation Debit Credit

b) Record the warranty expense.

Accounts and Explanation Debit Credit

c) Record the warranty payments for the company.

Accounts and Explanation Debit Credit

d)

Requirement 2. Assume the Estimated Warranty Payable is​ $0 on January​ 1, 2018. Post the 2018 transactions to the Estimated Warranty Payable​ T-account. At the end of 2018 how much in Estimated Warranty Payable does the company​ owe?

Use the​ T-account to determine the ending balance for the Estimated Warranty Payable account. Use a​ "Beg. Bal." posting reference to show the beginning balance of the account and an​ "End. Bal." posting reference to show the ending balance of the account.​ (Enter a​ "0" for any zero​ amounts.)

Estimated Warranty Payable

Answer 1

Answer
Data		2018
Sales		$600,000.00
Warranty costs	5%*600000	$30,000.00
Cash received for sale	20%*600000	$120,000.00
Balance as notes receivable	600000-120000	$480,000.00
Warranty Payments		$10,000.00
Journal Entries
1	Cash A/c Dr.	120000
	Notes Receivable A/c Dr.	480000
	To sales A/c		600000
	(being sales made in cash and credit)
2	Warranty expense A/c Dr.	30000
	To Estimated Warranty Payable A/c Dr.		30000
	(being warranty expense incurred)
3	Estimated Warranty Payable A/c Dr.	10000
	To Cash A/c		10000
	(being warranty payments made during the year)
Estimated Warranty Payable A/c
Particulars	Amount	Particulars	Amount
To Cash	10000	By Warranty expense	30000
Closing Balance	20000
Total	30000		30000