Question
MoTown Appliances sells built-in ranges for $ 1,400 each. The price includes a two-year warranty. During 2019, the company sells 1,650 ranges. On the basis
MoTown Appliances sells built-in ranges for $ 1,400 each. The price includes a two-year warranty. During 2019, the company sells 1,650 ranges. On the basis of past experience, approximately 4% of units sold will require warranty replacement at an average cost of $ 450 per unit. The actual warranty costs paid by MoTown during 2019 for replacement was $ 25,000.
Instructions:
a) Prepare adjusting journal entries to record the estimated warranty expense and the warranty payments during 2019 at December 31, 2019.
b) Assuming the warranty liability account has an unadjusted credit balance of $ 900, what is the 2019 ending balance ( after adjustment )?
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