On November 10, 2023, Singh Electronics began to buy and resell scanners for $55 each. Singh uses the perpetual system to account for inventories. The scanners are covered under a warranty that requires the company to replace any non-working scanner within 90 days. When a scanner is returned, the company simply throws it away and mails a new one from inventory to the customer. The company’s cost for a new scanner is only $35. Singh estimates warranty costs based on 18% of the number of units sold.The following transactions occurred in 2023 and 2024 (ignore GST and PST):

Required1. How much warranty expense should be reported for November and December 2023?2. How much warranty expense should be reported for January 2024?3. What is the balance of the estimated warranty liability as of December 31, 2023?4. What is the balance of the estimated warranty liability as of January 31, 2024?5. Prepare journal entries to record the transactions and adjustments (ignore sales taxes).

Transcribed Image Text:

2023 Nov. 15 Sold 2,000 scanners for $110,000 cash. 30 Recognized warranty expense for November with an adjusting entry. Dec. 8 Replaced 150 scanners that were returned under the warranty. 15 Sold 5,500 scanners. 29 Replaced 40 scanners that were returned under the warranty. 31 Recognized warranty expense for December with an adjusting entry. 2024 Jan. 14 Sold 275 scanners. 20 Replaced 63 scanners that were returned under the warranty. 31 Recognized warranty expense for January with an adjusting entry.