The accounting records of Miller Upholstery showed a balance of $2,300 in Estimated Warranty Payable at December 31, 2017. In the past, Miller Upholstery’s warranty expense has been 2.5 percent of sales. During 2018, Miller Upholstery made sales of $312,000 on account and paid $8,250 to satisfy warranty claims.

Requirements

1. Journalize Miller Upholstery’s warranty expense and cash payments made to satisfy warranty claims during 2018. Explanations are not required. Ignore cost of goods sold.

2. What balance of Estimated Warranty Payable will Miller Upholstery report on its balance sheet at December 31, 2018? What amount of warranty expense will Miller Upholstery report on its income statement for the year ended December 31, 2018?