Howard Company sells automatic can openers under a 90-day warranty for defective merchandise for Shs. 40 each.Based on past experience, Howard Company estimates that 2% of the units sold will become defective during the warranty period. Management estimates that the average cost of replacing a defective unit is Sh. 15. The units sold and units defective that occurred during the last two months of 2014 are as follows:

Month Units Units Defective

Sold Prior to December 31

September 35,000 500

October 33,000 350

Required:

Give entries to record sales for the units sold in September and October.(2 marks)

Prepare the journal entry to record the estimated warranty expense