Q.1 Walters Accounting Company receives its annual property tax bill for the calendar year on May 1, 2018. The bill is for $32,000 and payable on June 30, 2018. Walters paid the bill on June 30, 2018. The company prepares quarterly financial statements and had initially estimated that its 2018 property taxes would be $30,000.

Instructions

Prepare all the required journal entries for 2018 related to the property taxes, including quarterly accruals.

Q.2 Duane Herman sells exercise machines for home use. The machines carry a 4-year warranty. Past experience indicates that 6% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is $45 for labour and $75 for parts per unit. During 2018, 2,500 exercise machines were sold at an average price of $800. During the year, 60 of the machines that were sold were repaired at the average price per unit. The opening balance in the Warranty Liability account is zero.

Instructions

a)Prepare the journal entry to record the repairs made under warranty.

b)Prepare the journal entry to record the estimated warranty expense for the year. Determine the balance in the Warranty Liability account at the end of the year.