E9-32B. (Learning Objective 1: Accounting for warranty expense and the related liability)

The accounting records of Made of Glass Ceramics included the following balances at the end of the period:

Made of Glass has determined that its warranty obligations at the end of the year are equal to €12,000. During 20X0, the business paid €5,000 to satisfy the warranty claims.
Requirements 1. Journalize Made of Glass’s warranty expense for the period and the company’s cash payments to satisfy warranty claims. Explanations are not required.
2. Show what Made of Glass will report on its Income Statement and Balance Sheet for this situation.
3. Which data item from Requirement 2 will affect Made of Glass’s current ratio? Will Made of Glass’s current ratio increase or decrease as a result of this item?

Transcribed Image Text:

Provision for Warranty Repairs Warranty Expense Beg. bal. 4,000