Prepare journal entries to record warranty claims

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Scotty Constructions Ltd provides a 12-month warranty on building work performed by the entity. On 1 January 2020, there was a credit balance of $84,250 in its warranty provision account. During the year ended 31 December 2020, Scotty Constructions Ltd incurred $88,700 servicing warranty claims. All of the warranty costs were in the form of labour costs. During the year ended 31 December 2020, Scotty Constructions Ltd's revenue from building contracts was $3,455,000. Warranty liabilities are estimated as 2% of building revenue for the previous 12 months.

Required

Problem 1: Prepare journal entries to record:

(a) warranty claims during the period
(b) adjustments to the warranty provision account at 31 December 2020.

Reference no: EM132911216

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