A Company Sells Its Product Subject to a Warranty That

question 44

Essay

A company sells its product subject to a warranty that covers the cost of parts and labour for repairs during the six months after sale.Warranty costs are estimated to be 4.5% of sales for parts,and 1.5% of sales for labour.During the month of June,the company performed warranty work and used $8,000 worth of parts and paid $4,000 in wages for labour to do the warranty work.Sales for June amounted to $450,000.
(1)What account should be debited for the $4,000 in labour?
(2)What should be the amount of estimated warranty expense for June?
(3)If the Estimated Warranty Liability account had a $10,000 credit balance on May 31,what should be the account balance as of June 30?

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Definitions:

Financial

Pertaining to the management of money, investments, and other monetary transactions.

Marketing

The activities, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

Small Business Investment Companies (SBICs)

Privately owned and managed investment funds, licensed and regulated by the SBA, that provide capital to small businesses.