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Warranties Clean Corporation manufactures and sells Dishwashers. Clean provides all customers with a two-year warranty guaranteeing to repair, free of charge, any defects reported during this time period. During the year, it sold 100,000 Dishwashers for $245 each. Analysis of past warranty records indicates that 12% of all sales will be returned for repair within the warranty period. Clean expects to incur expenditures of $9 to repair each Dishwasher. The account Estimated Liability for Warranties had a balance of $120,000 on January 1. Clean incurred $135,000 in actual expenditures during the year.

Problem 1: Analysis of past warranty records indicates that 12% of all sales will be returned for repair within the warranty period. Clean expects to incur expenditures of $9 to repair each Dishwasher. The account Estimated Liability for Warranties had a balance of $120,000 on January 1. How does this entry affect the accounting equation?

Reference no: EM132833751

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