A Company Sells Sofas with a 6-Month Warranty

question 43

Essay

A company sells sofas with a 6-month warranty. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. In January, the company sold 100,000 sofas at $1,750 each; and 500 sofas needed repairs during that same month. The total repairs amounted to $85,000 costs from the upholstery materials inventory. Prepare the journal entries to record (a) estimated warranty expense for January and (b) warranty repair costs for January.

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Definitions:

Omnichannel Consumers

Customers who interact with and purchase from a brand through multiple sales channels (online, in person, mobile, etc.) expecting a seamless experience.

Big Data Analytics

The process of examining large and varied data sets to uncover hidden patterns, unknown correlations, market trends, customer preferences, and other useful business information.

Consumer Trends

Patterns or behaviors in purchasing and consumption that are widely observed among consumers over a period.

Merchandising

The variety of activities involved in promoting the sale of products at retail, including display techniques, discount offers, and product placement.