G Georgia Gwinnet x G Students Mail nhill@99 ×?i: MH Campus GG xy D ch 9 Homewor

Question

G Georgia Gwinnet x G Students Mail nhill@99 ×?i: MH Campus GG xy D ch 9 Homework x C ezto.mheducation.com/hm.tpx 3. 20.00 points Hitzu Co. sold a copier costing $7,500 with a two-year paits warranty to a customer on August 16.2016 for $15 000 cash Hitzu uses the perpetual inventory system. On November 22, 2017, the copier requires on-site repairs that are completed the same day The repairs cost $119 for materials taken from the Repair Parts Iniventory These are the only repairs required in 2017 for this copier. Based on experience, Hitzu expects an adjusting entry at the end of each year to incur warranty costs equal to 3% of do ar sales lt records warranty expense in 1. How much warranty expense does the company report in 2016 for this copler? 2. How much is the estimated warranty liability tor 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 copler as of December 31, 2017? 5. Prepare jounal enties to record (a) the copier's sale, (b) the adjustment on December 31, 2016, to recognize the warranty expense. and (c) the repairs that occur in November 2017 DOLL

Explanation / Answer

1 How much warranty expense does the company report in 2016 for this copier 450 2 The December 31, 2016, balance of the liability equals the expense because no repairs are provided in 2016. Therefore, the ending balance of the Estimated Warranty Liability account is $450 3 The company should report no additional warranty expense in 2017 for this copier. 4 The December 31, 2017, balance of the Estimated Warranty Liability account equals the 2017 beginning balance minus the costs incurred in 2017 to repair the copier Beginning 2017 Balance 450 Less:Parts Cost 119 Ending 2017 balance 331 5 Date General Journal Debit Credit 08/16/2016 Cash 15000 Sales 15000 08/16/2016 Cost of Goods sold 7500 Merchandise Inventory 7500 12/31/2016 Warrenty Expense 450 Estimated warrenty Liability 450 (15000*3%) 11/22/2017 Estimated warrenty Liability 119 Repair Parts Inventory 119

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