Record warranty expense, Income statement and ratios

Attached file

The accounting records of Ernestown Electric Inc. (EE) included the following balances before the year end adjustments: Estimated warranty liability Sales revenue Warranty expense | 11,000 | 180,000 | In the past, EE's warranty expense has been 3% of sales. During the current period, the business paid $6,300 to satisfy the warranty claims of customers. Required: . . . a) Record EE's warranty expense for the period and the company's payments to satisfy warranty claims b) Show what EE will report on its income statement and balance sheet for this situation (show supporting calculations) c) Which item from part (b) will affect EE's current ratio? Will EE's current ratio increase or decrease as a result of this item