Solution-Determine the estimated warranty liability at

Determine the estimated warranty liability at december

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Reference no: EM13516640

Betancourt Company sells automatic can openers under a 75-day warranty for defective merchandise. Based on past experience, Betancourt estimates that 3% of the units sold will become defective during the warranty period. Management estimates that the average cost of replacing or repairing a defective unit is $15. The units sold and units defective that occurred during the last 2 months of 2014 are as follows.

Month	Units Sold	Units Defective Prior to December 31
November	30,000	600
December	32,000	400

Instructions

(a) Determine the estimated warranty liability at December 31 for the units sold in November and December.

(b) Prepare the journal entries to record the estimated liability for warranties and the costs incurred in honoring 1,000 warranty claims. (Assume actual costs of $15,000.)

Reference no: EM13516640

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Determine the estimated warranty liability at december

Reference no: EM13516640

Reference no: EM13516640

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