Prepare journal entries to record warranty claims

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Question - Benson Builder Pty Ltd provides a 12-month warranty on building work performed by the entity. On 1 January 2016, there was a credit balance of $88000 in its warranty provision account. During the year ended 31 December 2016, Benson Builder Pty Ltd incurred $93400 servicing warranty claims.

All of the warranty costs were in the form of labour costs.

During the year ended 31 December 2016, Benson Builder Pty Ltd's revenue from building contracts was $7180000.

Warranty liabilities are estimated as 1% of building revenue for the previous 12 months.

Required - Prepare journal entries to record:

(a) Warranty claims during the period

(b) Adjustments to the warranty provision account at 31 December 2016.

Reference no: EM132565229

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