Determine what are the warranty expense balances

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Kiner Equipment Company sells computer a 2 year warranty. During 2004 the company sold 700 comouters. Based on past experience, the company has estimated the total 2 year warranty cost as 40.00 for parts and 80.00 for labor. (Assume all sales occur at December 31, 2004 and warranty obligatios are expected to settled evenly throughout the warranty period).

In 2005, Kinder incurred actual warranty cost relarive to 2004 computer sales of 10,000.00 for parts and 24,000.00.

Problem A. Under the expense warranty treatment, Give the entries to reflect the above transaction(accrual method) for 2004 and 2005.

Problem B. Under the cash basis method, What are the warranty expense balances for 2004 and 2005?

Problem C. The transactions of part (A) create what balance under current liabilities in 2004 balance sheet?

Reference no: EM132678198

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