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Required: 1. Prepare journal entries to record the transactions for 2020 and 2021. 2. Analyze the estimated warranty liability account on December 31, 2021 to ascertain if the actual repairs approximate the estimate. The sales and repairs occur evenly throughout the year. 3. Prepare the adjustment of the estimated warranty liability on December 31, 2021.

Required: 1. Prepare journal entries to record the transactions for 2020 and 2021. 2. Analyze the estimated warranty liability account on December 31, 2021 to ascertain if the actual repairs approximate the estimate. The sales and repairs occur evenly throughout the year. 3. Prepare the adjustment of the estimated warranty liability on December 31, 2021.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 3-3 (IAA) In 2020, Plumpton Company started selling new computer that carried a 2-year warranty against defects. Based on the manufacturer's recommendations, the entity estimated warranty cost as a percentage of sales. 3% First year of warranty Second year ofwarranty 9% Sales and actual warranty repairs are as follows: 2020 2021 5,000,000 100,000 7,000,000 250,000 Sales Actual warranty repairs Required: 1. Prepare journal entries to record the transactions for 2020 and 2021. 2. Analyze the estimated warranty liability account on December 31, 2021 to ascertain if the actual repairs approximate the estimate. The sales and repairs occur evenly throughout the year. 3. Prepare the adjustment of the estimated warranty liability on December 31, 2021.
Transcribed Image Text:Problem 3-3 (IAA) In 2020, Plumpton Company started selling new computer that carried a 2-year warranty against defects. Based on the manufacturer's recommendations, the entity estimated warranty cost as a percentage of sales. 3% First year of warranty Second year ofwarranty 9% Sales and actual warranty repairs are as follows: 2020 2021 5,000,000 100,000 7,000,000 250,000 Sales Actual warranty repairs Required: 1. Prepare journal entries to record the transactions for 2020 and 2021. 2. Analyze the estimated warranty liability account on December 31, 2021 to ascertain if the actual repairs approximate the estimate. The sales and repairs occur evenly throughout the year. 3. Prepare the adjustment of the estimated warranty liability on December 31, 2021.
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