On January 23, 2019, Zenox Company sold $105,000 of furniture on account that had a cost of $82,000. All of Zenox's sales are covered by an unconditional 24-month replacement warranty. Historical data indicates that warranty costs average 2% of the cost of sales. On January 29, 2019, Zenox replaced furniture with a cost of $2,000 that was covered by warranty. Required: a. Prepare the journal entry to record the estimated warranty liability for January. b. Prepare the entry to record the warranty expense incurred in January. c. Assuming the Estimated Warranty Liability account had a credit balance of $740 on January 1. 2019. calculate the balance at January 31, 2019 after the entries above were posted.

On January 23, 2019, Zenox Company sold $105,000 of furniture on account that had a cost of $82,000. All of Zenox's sales are covered by an unconditional 24-month replacement warranty. Historical data indicates that warranty costs average 2% of the cost of sales. On January 29, 2019, Zenox replaced furniture with a cost of $2,000 that was covered by warranty. Required: a. Prepare the journal entry to record the estimated warranty liability for January. b. Prepare the entry to record the warranty expense incurred in January. c. Assuming the Estimated Warranty Liability account had a credit balance of $740 on January 1. 2019. calculate the balance at January 31, 2019 after the entries above were posted.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 14EB: Anderson Air is a customer of Handler Cleaning Operations. For Anderson Airs latest purchase on...

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Question

On January 23, 2019, Zenox Company sold $105,000 of furniture on account that had a cost of
$82,000. All of Zenox's sales are covered by an unconditional 24-month replacement warranty.
Historical data indicates that warranty costs average 2% of the cost of sales. On January 29, 2019,
Zenox replaced furniture with a cost of $2,000 that was covered by warranty.
Required:
a. Prepare the journal entry to record the estimated warranty liability for January.
b. Prepare the entry to record the warranty expense incurred in January.
c. Assuming the Estimated Warranty Liability account had a credit balance of $740 on January
1, 2019, calculate the balance at January 31, 2019 after the entries above were posted.

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