Chapter 11, Problem S11.11SE

To determine

Accounting for Warranty expense and Warranty expense liability:

Sometimes the business man offer the warranty agreement to its customer for some agreed period of time. In such instances, the business estimates the warranty cost as a percentage of sale based on past performance and such warranty cost shall be treated as expense for the period in which sales revenue related to such warranty has been recorded. Though the warranty may be pending or accrue for later years, which will be shown as liability till the warranty period ends.

Requirement1:

TheJournal entries for recording the sales, warranty expense accrual and payment of warranty expense.

To determine

Requirement2:

The T-account of Estimated Warranty payable.