Milner Company is preparing adjusting entries at December 31. An analysis reveals the following:
1. During December, Milner Company sold 4,900 units of a product that carries a 60-day warranty. The sales for this product totalled $100,000. The company expects 6% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $15.
2. The company has been sued by a disgruntled employee. Legal counsel believes it is likely that the company will have to pay $200,000 in damages.
3. The company has been named as one of several defendants in a $400,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.
Instructions
Prepare adjusting entries, if required, for each of the three items.

Question

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The Answer of Milner Company is preparing adjusting entries at December 31. An analysis reveals the following:
1. During December, Milner Company sold 4,900 units of a product that carries a 60-day warranty. The sales for this product totalled $100,000. The company expects 6% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $15.
2. The company has been sued by a disgruntled employee. Legal counsel believes it is likely that the company will have to pay $200,000 in damages.
3. The company has been named as one of several defendants in a $400,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.
Instructions
Prepare adjusting entries, if required, for each of the three items.

Milner Company Is Preparing Adjusting Entries at December 31