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Question - Happy Trails USA guarantees of tires against defects for five years or 55,000 miles, which ever comes first, suppose Happy Trail USA can expect warranty cost during the five year period to add up to 5% of sales. Assume that Happy trails USA dealer in Atlanta, Georgia made sales of $580,00 during 2012. Happy Trails USA received cash for 30% of sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totaled of $7,000 during 2012.
1. Record the sales warranty expense and warranty payments of Happy Trail.
2. Post the estimated warranty payable T-account. Receiving balance was $15,000, at the end of 2012. How much in estimate warranty payable does Happy Trail owe to its customers?
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