Solution-Post to the estimated warranty payable T-account

Post to the estimated warranty payable T-account

Reference no: EM132634797

Question - Toyota, the car manufacturer, guarantees its vehicles for three years or 100,000 kilometres, whichever comes first. Suppose Toyota's experience indicates that it can expect warranty costs to equal to 3% of sales. Assume that Thomson Toyota in Adelaide makes sales of Toyota Corollas totalling $500,000 during 2018, its first year of operations. The business receives cash for 30% of the sales and loans receivable for the remainder. Payments to satisfy customer warranty claims totalled $10,000 during 2018. (These payments are reimbursed by Toyota.)

Required -

1. Record the journal entries for sales, warranty expense and warranty payments for Thomson Toyota.

2. Post to the estimated warranty payable T-account.

3. At the end of 2018, how much in warranty costs does Thomson Toyota still expect to pay?

Reference no: EM132634797

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Post to the estimated warranty payable T-account

Reference no: EM132634797

Reference no: EM132634797

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