Warranties}

Mason Auto Repair specializes in the repair of foreign car transmissions. To encourage business, Mason offers a six-month warranty on all repairs. The following data are available for 2018:

Assume that warranty claims are paid in cash.
\section*{Required:}
1. Compute the warranty expense for 2018. (Round the number of warranty claims to the nearest whole claim).
2. Prepare the entry to record the payment of the 2018 warranty claims.

3. CONCEPTUAL CONNECTION What is the December 31, 2018, balance in the estimated warranty liability account? Why has the balance in the warranty liability account changed from January 1, 2018? Note: Round all answers to two decimal places.

Problem

Transcribed Image Text:

Transmissions repaired, 2018 Expected frequency of warranty claims Actual warranty claims, 2018 Estimated warranty liability, 1/1/18 Estimated cost of each warranty claim 6,350 0.03 per repair $63,000 $50,000 $ 300