Figure the calculations for the following: Warranty Costs Brigham Company sells

Question

Figure the calculations for the following:

Warranty Costs Brigham Company sells an electric timer that carries a three-month unconditional warranty against product failure. Based on a reliable statistical analysis, Brigham knows that between the sale and the end of the product warranty period, four percent of the units sold will require repair at an average cost of $40 per unit. The following data reflect Brigham's recent experience: October November December Dec. 31 Total Units sold 36,000 34,000 45,000 115,000 n product failures from sales in: October November December Know 210 360 410 1,080 590 410 320 550 230 Calculate, and prepare a journal entry to record, the estimated liability for product warranties at December 31. Assume that warranty costs of known failures have already been reflected in the records. General Journal Date Description Debit Credit Dec.3 Product Warranty Expense Estimated Liability for Product Warranty To provide for estimated future warranty expense.

Explanation / Answer

Known product failures till 31st December = 1080

Average cost/failure = $40

So, Product Warrant Expense will be debited by = 10800 * 40 = 43200

Estimated Liability for Product Warranty will be credited by = 43200

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