The accounting records of Clay Ceramics included the following at January 1, 2014:
Estimated Warranty Payable
4,000 Beg. Bal.
In the past, Clay’s warranty expense has been 8% of sales. During 2014, Clay made sales of $ 136,000 and paid $ 7,000 to satisfy warranty claims.
1. Journalize Clay’s warranty expense and warranty payments during 2014. Explanations are not required.
2. What balance of Estimated Warranty Payable will Clay report on its balance sheet at December 31, 2014?