Exercise 11-05 a-c (Part Level Submission)

Betancourt Company sells automatic can openers under a 75-day warranty for defective merchandise. Based on past experience, Betancourt estimates that 3% of the units sold will become defective during the warranty period. Management estimates that the average cost of replacing or repairing a defective unit is $15. The units sold and units defective that occurred during the last 2 months of 2020 are as follows.

Month		Units Sold		Units Defective Prior to December 31
November		30,000		600
December		32,000		400

Prepare the journal entry to record the costs incurred in honoring 1,000 warranty claims. (Assume actual costs of $15,000.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
Warrenty Liability	15,000
Repair Parts		15,000
(To record honoring of warranty contracts.)

Prepare the journal entry to record the warranty liability at December 31 for the units sold in November and December. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
Warrenty Expense	12,900
Warrenty Liability		12,900

Give the entry to record the honoring of 500 warranty contracts in January at an average cost of $15. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit