The accounting records of Clayton’s Auto Repair showed a balance of $4,000 in Estimated Warranty Payable at December 31, 2011. In the past, Clayton’s warranty expense has been 4% of sales. During 2012, Clayton’s made sales of $422,000 on account and paid $5,000 to satisfy warranty claims.

Requirements

1. Journalize Clayton’s sales, warranty expense, and cash payments made to

satisfy warranty claims during 2012. Explanations are not required. Ignore cost

of goods sold.

2. What balance of Estimated Warranty Payable will Clayton’s report on its balance sheet at December 31, 2012? What amount of warranty expense will Clayton’s report on its Income statement for the year ended December 31, 2012?