Felix Sales Inc

question 94

Essay

Felix Sales Inc.offers warranties on all its electronic goods.Warranty expense is estimated at 3.5% of sales revenue.In 2015,Felix had $333,000 of sales.In the same year,Felix paid out $8,750 of warranty payments.Provide the journal entry to record the warranty expense.

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Definitions:

Special Purpose Entity

A legal entity created by a firm for a specific purpose, often to isolate financial risk.

Sponsoring Corporation

An entity that supports or backs another entity, event, or project, often through financial investment or by lending its brand's credibility.

Short-Term Basis

A term indicating a period or scenario focused on the immediate or near future, often involving decisions or plans that are temporary or for a duration of up to one year.

Negative Residual Value

Negative residual value implies that the value of an asset at the end of its useful life is expected to be less than zero, indicating costs associated with disposal or removal.