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Question 3: (30 Points) On December 1, 2015 Raff Company introduces a new product that includes a one-year warranty on parts. In December, 2,000 units
Question 3: (30 Points)
On December 1, 2015 Raff Company introduces a new product that includes a one-year warranty on parts. In December, 2,000 units were sold. Management believes that 10% of the units will be defective and that the average warranty costs will be $100 per unit.
Instruction:
- Prepare the adjusting entry at December 31 to accrue the estimated warranty cost.
- In 2015 warranty contract honored in 50 units, prepare the journal entry.
- Prepare the adjusting entry at the end of warranty contract.
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