Question

Saran Digital, Inc. starts the year with $3,500 in its Estimated Warranty Payable account. During the year, there were $226,000 in sales and $5,000 in warranty repair payments. Saran Digital estimates warranty expense at 4% of sales. The Warranty Expense for the year is ________.

Answer 1

Answer:

Warranty expense 10,540

Explanation:

During the year we make te following:

warrant expense   1,500 debit

warrant liability     3,500 debit

               cash              5,000 credit

:

Then we have the warranty expense associate with the current year sales

Warranty expense expected 4% of sales:

4% of 226,000 = 9,040

Adding these two we got a total for warranty expenses for

1,500 + 9,040 = 10,540