Please make the response detailed and easy to read, thank you

1) During 2017, Smithfield Company introduced a new product carrying a two-year warranty against defects, which is included in the selling price of the product. The estimated warranty costs are 2% of sales within the first 12 months following the sale and 4% in the second 12 months following the sale. Sales and actual warranty expenditures for the years ended December 31, 2017, and 2018 are:

	Sales	Actual Warranty Expenditures
2017	$ 900,000	$13,500
2018	1,500,000	45,000
	$2,400,000	$58,500

a) Prepare all journal entries in proper form for both 2017 and 2018. Assume all payments for actual warranty expenditures are made in cash.

b) Clearly show which accounts and amounts would be reported on the income statement for the both 2017 and 2018.

c) Show what Smithfield report would as estimated warranty liability on its balance sheet as of December 31, 2018. You do not need to separate current from noncurrent liabilities.

Answer rating: 100% (QA)

Answer a Year 2017 2018 Smithfield Company b Income Expenditure c Journal Entries Particulars Accoun... View the full answer