Listed below are a few transactions and events of Maxum Company. 1. Employees ea

Question

Listed below are a few transactions and events of Maxum Company. 1. Employees earn vacation pay at a rate of one day per month. During December, 21 employees qualify for one vacation day each. Their average daily wage is $280 per employee. 2. During December, Maxum Company sold 3,700 units of a product that carries a 60-day warranty. December sales for this product total $136,000. The company expects 10% 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.

Explanation / Answer

Transaction Account title and Explanation Debit Credit 1 Vacation benefits expense $5,880      Vacation benefits payable $5,880 (21 employees *1 day*$280) 2 Warranty expense $6,660      Estimated warranty liability $6,660 (3,700 units*10%*$18)

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