The accounting records of Carmen Appliances included the following balances at the end of the period:

In the past, Carmen’s warranty expense has been 8% of sales. During the current period, the business paid $7,500 to satisfy the warranty claims.

Requirements

1. Journalize Carmen’s warranty expense for the period and the company’s cash payments to satisfy warranty claims. Explanations are not required.

2. Show what Carmen will report on its income statement and balance sheet for this situation at the end of the period.

3. Which data item from requirement 2 will affect the current ratio? Will Carmen’s current ratio increase or decrease due to this item?

Transcribed Image Text:

Accrued Warranty Payable Beg bal 5,500 Warranty Expense Sales Revenue 104,000