Exercise 11-12 Accounting for estimated liabilities LO P4 Listed below are a few

Question

Exercise 11-12 Accounting for estimated liabilities LO P4

Listed below are a few transactions and events of Maxum Company.

Employees earn vacation pay at a rate of one day per month. During December, 22 employees qualify for one vacation day each. Their average daily wage is $300 per employee.

During December, Maxum Company sold 4,600 units of a product that carries a 60-day warranty. December sales for this product total $136,000. The company expects 9% of the units to need warranty repairs, and it estimates the average repair cost per unit will be $18.

Prepare any necessary adjusting entries at December 31, 2017, for Maxum Company’s year-end financial statements for each of the above separate transactions and events.

Journal entry worksheet 2 Employees earn vacation pay at a rate of one day per month. During December, 22 employees qualify for one vacation day each. Their average daily wage is $300 per employee. Record the related adjusting entry. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal

Explanation / Answer

Transaction General Journal Debit Credit 1 Vacation benefits expense(22 employees × 1 day × $300) $6,600 Vacation benefits payable $6,600 2 Warranty expense(4,600 units × 9% × $18) $7,452 Estimated warranty liability $7,452

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