Current Liabilities Accounting for Warranties (14 points)

Palmer Manufacturing began operations in January 2018. Palmer sells widgets that carry a two-year manufacturer's warranty against defects in workmanship. Palmer's management projects that 8% of the widgets will require repair during the two-year period. The widgets sell for $500 each. The average cash cost to repair a widget is $40. Sales and warranty information for 2018 is as follows:

2018: Sold 15,000 widgets on account; incurred warranty expenditures of $25,000.

Required: 1. Prepare the necessary journal entry in 2018 to record the warranty expense.

2. Prepare the necessary journal entry in 2018 to record the warranty expenditures ($25,000). 3. What is the balance in the warranties payable account on the December 31, 2018 balance sheet?

Account	Debit	Credit
Account	Debit	Credit
Account	Debit	Credit