Metro Sales Company Offers Warranties on All Its Electronic Goods

question 196

Essay

Metro Sales Company offers warranties on all its electronic goods.Warranty expense is estimated at 3.5% of sales revenue.In 2019,Metro had sales of $333,000.In the same year,Metro replaced defective goods with merchandise inventory costing $8,750.Prepare the journal entry to record the replacement of defective goods.Omit explanation.

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Definitions:

Negotiation

The process whereby parties discuss their differences and attempt to reach a mutually agreeable resolution.

Indorses

Endorses or signs the back of a financial instrument (such as a check) to transfer rights to another party.

Credit Union

A member-owned financial cooperative that provides banking services, including savings and loan facilities, to its members.

Shelter Principle

The principle that the holder of a negotiable instrument who cannot qualify as a holder in due course (HDC), but who derives his or her title through an HDC, acquires the rights of an HDC.