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Merritt Equipment Company sells computers for $1,620 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and
Merritt Equipment Company sells computers for $1,620 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 860 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $40 for parts and $60 for labor. (Assume sales all occur at December 31, 2017.) In 2018, Merritt incurred actual warranty costs relative to 2017 computer sales of $13,200 for parts and $19,800 for labor. Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2017 and 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Date Account Titles and Explanation Credit 2017Accounts Receivable 1393200 1393200 Sales Revenue (To record sale of computers) 2017Warranty Expense 86000 Warranty Liability 86000 (To record liability against warranty costs) 2018 Warranty Liability 33000 Inventory 13200 Cash, Inventory, Accrued Payroll 19800 SHOW LIST OF ACCOUNTS The transactions of part (a) create what balance under current liabilities in the 2017 balance sheet? Current Liabilities- Total payroll of Walnut Co. was $1,800,000, of which $280,000 represented amounts paid in excess of $118,500 to certain employees. The amount paid to employees in excess of $7,000 was $1,350,000. Income taxes withheld were $425,000. The state unemployment tax is 1.2%, the federal unemployment tax is .8%, and the F.I.C.A. tax is 7.65% on an employee's salaries and wages to $118,500 and 1.45% in excess of $118,500. Prepare the journal entry for the salaries and wages paid. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Account Titles and Explanation Payroll Tax Expense Debit Credit 129340 FICA Taxes Payable FUTA Taxes Payable SUTA Taxes Payable 120340 3600 5400 SHOW LIST OF ACCOUNTS Prepare the entry to record the employer payroll taxes. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Debit Credit Account Titles and Explanation
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