b) What should be the amount of estimated warranty expense for June? 4
c) If the Estimated Warranty Liability account had a $10,000 credit balance on May 31, what should be the account balance as of June 30?
|The Estimated Warranty liability is debited for incurring the labour cost of $4000.|
|Journal entry for incurrence:|
|Estimated warranty liabilities||4000|
|(for labour cost incurred for warranty)|
|The Estimated Warranty expense for June:|
|Sales for June||450000|
|Multiply: Total Warranty cost as % of sales revenue||5%|
|Estimated warranty expenses||22500|
|Beginning balance of warranty liability||10000|
|Add: Liabilities for June recognized||22500|
|Less: Incurred in June (8000+4000)||12000|
|Estimated warranty liabilities balance on June30||20500|
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