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PT Berlian sells products by providing a one-year repair guarantee. Based on the results of analysis...

PT Berlian sells products by providing a one-year repair guarantee. Based on the results of analysis and industry experience, it is known that only 2% of customers who come request a guarantee. The average cost spent to guarantee each product is Rp150,000. In 2015 product sales were 50,000 units with a total actual guarantee issued of Rp. 80,000,000. Make a recording of the burden of recognition and granting a guarantee in 2015!

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Answer #1

PT Berlian estimates that the expense for warrantee or  guarantee is 2% of total sales.

Therefore according to the sales of 2015 and the estimate rate. The total warrantee provision to be recorded is

Total Provision: Average Cost of Warranty*Product Sales for 2015*Estimation Rate = 150,000*50,000*2% = 150,000,000

Therefore JE for recording provision is as follows

Debit Warranty Expense Account RP 150,000,000
Credit Provison for Warranties RP 150,000,000

When actual liability of occurs

Debit Provison for Warranties RP 80,000,000
Credit Cash RP 80,000,000
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