Castellitto Company began selling game consoles on November 1, 2017. The company offers a 75-day warranty for

Question:

Castellitto Company began selling game consoles on November 1, 2017. The company offers a 75-day warranty for defective merchandise. Based on past experience with other similar products, Castellitto estimates that 2.5% of the units sold will become defective in the warranty period, and that the average cost of replacing or repairing a defective unit is $20. In November, Castellitto sold 30,000 units and 450 defective units were returned. In December, Castellitto sold 32,000 units and 630 defective units were returned. The actual cost of replacing the defective units was $21,600.
Instructions
(a) Prepare a journal entry to accrue for the estimated warranty costs for the November and December sales at December 31, 2017.
(b) Prepare one summary journal entry at December 31, 2017, to record the cost of replacing the defective game consoles returned during November and December.
(c) What amounts will be included in Castellitto's 2017 income statement and at December 31, 2017, with regard to the warranty?
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...