2. & 3. Record the necessary entries in the Journal Entry Worksheet below. (If n

Question

2. & 3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Required Information Journal entry worksheet The following information applies to the questions displayed below Record the contingent liability for warranties. Computer Wholesalers restores and resells notebook computers. It originally acquires the notebook computers from corporations upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against defects. Based orn previous experience, Computer Wholesalers expects warranty costs to be approximately 6% of sales. Sales for the month of December are $440,000. Actual warranty expenditures in January of the following year were $15,000. Note: Enter debits before credits Transaction General Journal Debit Credit Record entry Clear entry View general journal

Explanation / Answer

When there is a contingent liability and it can be estimated the entry should be recorded:

1. While making the liability of the warranty claim is estimated and recorded

Warranty Expenses account Dr (440000*6%) 26400 ---------

To Estimated warranty payable account --------- 26400

2.When the actual warranty payment made

Estimated warranty payable account 15000 ---------

To Cash account --------- 15000

3. The balance of the Estimated warranty of (26400-15000) = 11400, Is the upcoming future warranty to be claimed if any arises. Hence we need to maintain the same.

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