Reference no: EM132543272

Question - Chang Co. sold a copier costing $3,800 with a two-year parts warranty to a customer on August 16, 2011 for $5,500 cash. Chang uses the perpetual inventory system. On November 22, 2012, the copier requires on-site repairs that are completed the same day. The repairs cost $199 for materials taken from the repair parts inventory. These are the only repairs required in 2012 for this copier. Based on experience, Chang expects to incur warranty costs equal to 4% of dollar sales. It records its warranty expense with an adjusting entry at the end of every year.

Required -

1. How much warranty expense does the company report in 2011 for this copier?

2. How much is the estimated warranty liability for this copier as of December 31, 2011?

3. How much warranty expense does the company report in 2012 for this copier?

4. How much is the estimated warranty liability for this copier as of December 31, 2012?

5. Record the copier's sale, the adjustment on December 31, 2011, and the repairs that occur in 2012?