(Learning Objective 4: Account for warranty expense and accrued warranty payable)North Boulder USA, a tire manufacturer, guarantees its tires against defects for five years or60,000 miles, whichever comes first. Suppose North Boulder USA can expect warranty costsduring the five-year period to add up to 3% of sales. Assume that a North Boulder USA dealerin Denver, Colorado, made sales of $641,000 during 2018. North Boulder USA received cashfor 15% of the sales and took notes receivable for the remainder. Payments to satisfy customerwarranty claims totaled $18,500 during 2018.1. Record the sales, warranty expense, and warranty payments for North Boulder USA.Ignore cost of goods sold.2. Post to the Accrued Warranty Payable T-account. The beginning balance was $14,000. Atthe end of 2018, how much in accrued warranty payable does North Boulder USA owe toits customers?
(Learning Objective 4: Account for warranty expense and accrued warranty payable)
North Boulder USA, a tire manufacturer, guarantees its tires against defects for five years or
60,000 miles, whichever comes first. Suppose North Boulder USA can expect warranty costs
during the five-year period to add up to 3% of sales. Assume that a North Boulder USA dealer
in Denver, Colorado, made sales of $641,000 during 2018. North Boulder USA received cash
for 15% of the sales and took notes receivable for the remainder. Payments to satisfy customer
warranty claims totaled $18,500 during 2018.
1. Record the sales, warranty expense, and warranty payments for North Boulder USA.
Ignore cost of goods sold.
2. Post to the Accrued Warranty Payable T-account. The beginning balance was $14,000. At
the end of 2018, how much in accrued warranty payable does North Boulder USA owe to
its customers?
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