value S..00 points Hitzu Co. sold a copier costing $7,500 with a two-year parts

Question

value S..00 points Hitzu Co. sold a copier costing $7,500 with a two-year parts warranty to a customer on August 16, 2016, for $15,000 cash. Hitzu uses the perpetual inventory system. On Novembe 22, 2017, the copier requires on-site repairs that are completed the same day. The repairs cost $103 for materials taken from the Repair Parts Inventory. These are the only repairs required in 2017 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjusting entry at the end of each year 1. How much warranty expense does the company report in 2016 for this copier? 2. How much is the estimated warranty liability for this copier as of December 31, 2016? 3. How much warranty expense does the company report in 2017 for this copier? 4. How much is the estimated warranty liability for this copier as of December 31, 2017?

Explanation / Answer

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. 1. 15000*4% 600 2. 15000*4% 600 3. 0 As expense of full warrany reported in 2016 4. 600-103 497 Out of total liaility of 600, 103 already incurred 5. Date Account Debit Credit Aug 16 2016 Cash 15000 Sale 15000 (To record the sale) Aug 16 2016 Cost of Goods Sold 7500 Merchandise Inventory 7500 (To record the Cost of Goods Sold) Dec 31 2016 Warranty Expense 600 Estimated Warranty Liability 600 (4% warrant liability recorded) Nov 22 2017 Estimated Warranty Liability 103 Repair Part Inventory 103 (To record repair)

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