Product A comes with a three year warranty when purchased by customers. The estimated warranty costs as a percentage of dollar sales are 3% in the year of sale, 2% in the second year after the sale and 1% in the third year after the sale. The following information relates to sales and warranty expenditures of Product A Actual warranty expenditures Year Year 1 Year 2 Year 3 Sales $400,000 $ 10,000 $500,000 $350,000 $ 35,000 $ 22,000 Which of the following is NOT part of the required journal entry in Year 1 based on the above information?
Product A comes with a three year warranty when purchased by customers. The estimated warranty costs as a percentage of dollar sales are 3% in the year of sale, 2% in the second year after the sale and 1% in the third year after the sale. The following information relates to sales and warranty expenditures of Product A Actual warranty expenditures Year Year 1 Year 2 Year 3 Sales $400,000 $ 10,000 $500,000 $350,000 $ 35,000 $ 22,000 Which of the following is NOT part of the required journal entry in Year 1 based on the above information?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Product A comes with a three year warranty when purchased by customers. The estimated warranty costs as a percentage of dollar sales are 3% in the
year of sale, 2% in the second year after the sale and 1% in the third year after the sale.
The following information relates to sales and warranty expenditures of Product A
Actual warranty
expenditures
Year
Year 1
Year 2
Year 3
Sales
$400,000
$ 10,000
$500,000
$ 35,000
$350,000
$ 22,000
Which of the following is NOT part of the required journal entry in Year 1 based on the above information?
Multiple Choice
Debit warranty expense $10,000
None of the other alternatives are correct
Credit cash $10,000
Credit sales $400,000
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