Chapter 11, Problem E11.22E

To determine

Warranty Expense: Warranty Expense refers to the cost of repair or replacement that a business may incur in future or has already incurred. Thus, in order to fulfil the warranty claims in future, warranty expense is record and estimated warranty payable is created.

Vacation benefits expense: Vacation benefit expense refers to the expense which a company has to bear for holiday pay, vacation pay or sick day pay when an employee is not working.

Employee bonus: An employee bonus is the compensation given to employee for over and above the normal wages or salaries.

Bonus from the net income (after deducting bonus) is calculated as under –

$Bonus to be paid = \frac{Bonus Rate X Net Income}{\left( 100 \%+Bonus rate \right)}$

To prepare:

Journal entries for McNight Industries for the given transactions.