Zebra Corp. commenced operations on January 1, 2016. It estimates warranty expense as 1% of yearly sales. During June 2016 it satisfied warranty claims as follows:
Parts from inventory $2,000
Salaries paid in cash 500
The 2016 warranty claims amounted to $22,000 (including the entry above) and 2016 sales revenue was $2 million.
Required:
1. Record the June warranty claims of $2,500.
2. Record the 2016 warranty expense.
3. Calculate the balance in the estimated warranty liability account a December 31, 2016. Comment on your calculations.
Descriptions and general ledger account numbers are not necessary. Show calculations where applicable.