Recording journal entry for estimated warranty

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Reference no: EM1356739

Bombeck Company sells a product for $1,500. When the customer buys it, Bombeck provides a one-year warranty. Bombeck sold 120 products during 2010. Based on analysis of past warranty records, Bombeck estimates that repairs will average 3% of total sales.

Required:

1. Prepare a journal entry to record the estimated liability.

2. Assume that during 2010, products under warranty must be repaired using repair parts from inventory costing $4,950. Prepare the journal entry to record the repairs of products.

Reference no: EM1356739

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