Sea Port Company sells a product that carries a 60-day unconditional warranty against product failure.  Based on statistical analysis, Sea Port knows that between the time of sale and the lapse of the warranty, 4% of the units sold will fail and require repair at an avenge cost of $40 per unit.    The following data reflect the first three months during which the product was sold.     October November December Units sold 30,000 36,000 60,000 Known units of product failure       From sales of   October 480 600 120                          November   300 960                          December     900   Prepare the general journal entry to record Sea Port’s estimated liability for product warranties at December 31. Assume that warranty costs of known failures have already been reflected in the records.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Sea Port Company sells a product that carries a 60-day unconditional warranty against product failure.  Based on statistical analysis, Sea Port knows that between the time of sale and the lapse of the warranty, 4% of the units sold will fail and require repair at an avenge cost of $40 per unit. 

 

The following data reflect the first three months during which the product was sold.

 

 

October

November

December

Units sold

30,000

36,000

60,000

Known units of product failure

 

 

 

From sales of   October

480

600

120

                         November

 

300

960

                         December

 

 

900

 

Prepare the general journal entry to record Sea Port’s estimated liability for product warranties at December 31. Assume that warranty costs of known failures have already been reflected in the records.

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