Prepare the journal entry to record the estimated warranty

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Question - Mixed Cake Corporation has a December 31 year-end. The company sells calculators and provides a lifetime warranty on their product. Using past experience they estimate that 2% of calculators sold will be returned for replacement. The replacement cost of one calculator is $25. During 2019 the total sales for SIAST Corporation was $650,000 or 13,000 calculators sold at $50 per unit. On January 10, 2020 thirty calculators were returned and replaced under the warranty.

Required -

1. Prepare the journal entry to record the estimated warranty for 2019 on December 31.

2. Prepare the journal entry to record the replacement of the calculators on January 10, 2020.

Reference no: EM132883020

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