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

(a)

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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
Warranty Expense (Incorrect)	27,900 (Incorrect)	X
Warranty Liability (Incorrect)	X	27,900 (Incorrect)
(To record honoring of warranty contracts.)