MoTown Appliances Sells Built-In Ranges for $ 1,400 Each

question 179

Essay

MoTown Appliances sells built-in ranges for $ 1,400 each. The price includes a one-year warranty. During 2021, the company sells 1,650 ranges. On the basis of past experience, the 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 2021 were $ 25,000.
Instructions
a) Prepare journal entries to record the estimated warranty expense and the warranty payments during 2021.
b) Assuming the liability has an unadjusted credit balance of $ 900, what is the 2021 adjusted liability balance?

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