Trekster Corrector guarantees its snowmobiles for three years. Company experience indicates that warranty costs will be approximately 4% of sales. Assume that the Trekster dealer in Colorado Springs made sales totaling $ 533,000 during 2014. The company received cash for 30% of the sales and notes receivable for the remainder. Warranty payments totaled $ 17,000 during 2014.
1. Record the sales, warranty expense, and warranty payments for the company. Ignore cost of goods sold.
2. Post to the Estimated Warranty Payable T-account. At the end of 2014, how much in Estimated Warranty Payable does the company owe? Assume the Estimated Warranty Payable is $ 0 on January 1, 2014.