Blalock Company sells products with a 2-year warranty. Past experience indicates that 2% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is estimated to be $75 per unit. During 2014 7000 units were sold at an average price of $400. During the year repairs were made on 55 units at a cost of $3600.
Instructions
Prepare journal entries to record the repairs made under warranty and estimated warranty expense for the year.

Question

Quizplus · Accepted Answer

The Answer of Blalock Company sells products with a 2-year warranty. Past experience indicates that 2% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is estimated to be $75 per unit. During 2014 7000 units were sold at an average price of $400. During the year repairs were made on 55 units at a cost of $3600.
Instructions
Prepare journal entries to record the repairs made under warranty and estimated warranty expense for the year.

Blalock Company Sells Products with a 2-Year Warranty