Question

During 2018, lota sold 600 laptops for $500 each. All laptops comes with a 1-year original warranty. Lota estimated warranty costs will be 3% of sales. By December 31, 2018 lota had spent $2,00 to fix or replace computer cover warranty. Lota collects a 5% sales tax on all laptops sold. Which will be remitted to the government in 2019?

List the current liability associated with this transaction.

Answer 1

Estimated Warranty liability at the end:
Sales revenue (600*500)		300000
Multiply: Estimated % of Warranty cost	3%
Estimated warranty liability		9000
Less: Actual warranty cost incurred	-2000
Estimatd warranty liability at the end	7000
Sales tax Liablities:
Sales revenue			300000
Multiply: % of sales tax collected	5%
Sales tax payable			15000
Current liabilities:
Sales tax payable			15000
Estimated warranty liability		7000
Total Current liabilities		22000