Home / Questions / Trail Runner USA a tire manufacturer guarantees its tires against defects for five years
Trail Runner USA, a tire manufacturer, guarantees its tires against defects for five years or 60,000 miles, whichever comes first. Suppose Trail Runner
USA can expect warranty costs during the five-year period to add up to 5 % of sales. Assume that a Trail Runner USA dealer inDenver, Colorado, made sales of $474,000 during 2018. Trail Runner USA received cash for 30% of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totaled $19,000 during 2018. Record the sales, warranty expense, and warranty payments for Trail Runner USA (Record debits first, then credits.)
First, record the sale of the tires.
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Journal Entry |
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Accounts |
Debit |
Credit |
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Now, accrue the warranty expense.
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Journal Entry |
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Accounts |
Debit |
Credit |
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Next, record the payment of warranty expenses.
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Journal Entry |
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Accounts |
Debit |
Credit |
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2. Post to the Accrued Warranty Payable T-account. The beginning balance was
$ 17 comma 000$17,000.
At the end of 2018, how much in accrued warranty payable does Trail Runner USA owe to its customers?
Select the appropriate descriptions, and enter the beginning balance and post the entries to the Accrued Warranty PayableT-account. Calculate the balance of the liability account.
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Accrued Warranty Payable |
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At the end of 2018, Trail Runner USA owes $ |
_______ |
to its customers from Accrued Warranty Payable. |
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