Reference no: EM132574746
David Manufacturing began operations in January 2021. David manufactures and sells two different computer monitors.
Monitor A is a flat panel high-definition monitor, which carries a two-year manufacturer's warranty against defects in workmanship. David's management project that 6% of the monitors will require repair during the first year of the warranty while approximately 8% will require repair during the second year of the warranty. Monitor A sells for $400. The average cost to repair a monitor is $80.
Monitor B is a regular LED monitor that retails for $150. Sean has entered into an agreement with a local electronics firm who charges David $20 per monitor sold and then covers all warranty costs related to this monitor.
Sales and warranty information for 2021 is as follows:
1. Sold 2,000 monitors (800 monitor A and 1,200 monitor B); all sales were on account.
2. Actual warranty expenditures for monitor A were $4,000.
Question 1: Prepare journal entries that summarize the sales and any aspects of the warranty for 2021.
Question 2: Determine the balance in the Warranty Liability account at the end of 2021.
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