1. An electronic goods retailer sells electronic goods with a standard one-year warranty agreement. The retailer is obligated to remedy any product deficiency through repairs or replacements within one year of the sale. During the year ended 30 June 2020, the retailer sold 50,000 units of products. Based on experience, the retailer estimates that 0.10% of its products sold are brought back to the retailer within one year for major repairs or replacements, and 0.40% of its products sold are brought back for minor repairs under the warranty agreement. The remaining 99.50% of products sold are not brought back for any repair or replacement. The retailer further estimates that a major repair and replacement costs $300 and a minor repair costs $50. The retailer reported a warranty provision of $15,000 on the Statement of Financial Position on 30 June 2019 and incurred an expenditure of $8,000 to repair and replace products during the year ended 30 June 2020 under the warranty agreement.

Required

1. Calculate how much new warranty provision the retailer should create during the year ended 30 June 2020. (5 marks

2. Answer to Question 4Aa
   Beginning balance of warranty provision
   Less Warranty expenditure during the year ended 30 June 2020
   Warranty provision balance after incurring the warranty expenditure during the year ended 30 June 2020
   Type of return	Units sold	Percentage	Units under each category		Estimated cost in each category	Estimated cost
   No return
   Minor repair
   Major repair and replacement
   Warranty provision balance after incurring the warranty expenditure during the year ended 30 June 2020
   New provision required

   b.Prepare journal entries to record warranty expense and warranty provision during the year ended 30 June 2020. Show all necessary calculations. (5 Marks)
3. Prepare a note showing the reconciliation of warranty provision. (5 Marks)

4. Answer to question 4Ac. Reconciliation of Warranty Provision
   Balance as at 30 June 2019
   Warranty expenditure during the year ended 30 June 2020
   New provision
   Balance as at 30 June 2020

d.Briefly explain the usefulness of a reconciliation of warranty provision. (5 Marks)