Question

[The following information applies to the questions displayed below.] Hitzu Co. sold a copier (that costs...

[The following information applies to the questions displayed below.]
Hitzu Co. sold a copier (that costs $5,500) for $11,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu expects warranty costs to be 4% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $133 for materials taken from the repair parts inventory. These are the only repairs required in Year 2 for this copier.

Complete this question by entering your answers in the tabs below.

1.How much warranty expense does the company report for this copier in Year 1?
2. How much is the estimated warranty liability for this copier as of December 31 of Year 1?
3. How much is the estimated warranty liability for this copier as of December 31 of Year 2?

Prepare journal entries to record (a) the copier’s sale; (b) the adjustment to recognize the warranty expense on December 31 of Year 1; and (c) the repairs that occur on January 5 of Year 2.
Journal entry worksheet

  • Record the sale of a copier for $11,000 cash.
  • Record the cost of goods sold of $5,500.
  • Record the estimated warranty expense at 4% of the sales.
  • Record the cost of repairs that occur on January 5 of Year 2.
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