Question

On November 10, 2014, Bordux Electronics began to buy and resell scanners for $55 each. Bordux uses the perpetual system to account for inventories. The scanners are covered under a warranty that requires the company to replace any non-working scanner within 90 days. When a scanner is returned, the company simply throws it away and mails a new one from inventory to the customer. The company’s cost for a new scanner is only $35. Bordux estimates warranty costs based on 18% of the number of units sold. The following transactions occurred in 2014 and 2015 (ignore GST and PST):


Required
1. How much warranty expense should be reported for November and December 2014?
2. How much warranty expense should be reported for January 2015?
3. What is the balance of the estimated warranty liability as of December 31, 2014?
4. What is the balance of the estimated warranty liability as of January 31, 2015?
5. Prepare journal entries to record the transactions and adjustments (ignore salestaxes).


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  • CreatedJanuary 08, 2015
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