Canadian Health Care Inc. provides a two-year assurance warranty on its products. Estimates are that warranty costs will be 3% of sales in the year of sale and 5% the following year. Sales and actual warranty costs for Canadian Health Care's first two years of operations were Instructions
a) Determine the warranty expense and warranty provision as at year end for 2020.
b) Determine the warranty expense and warranty provision liability as at year end for 2021.
c) Prepare all relevant journal entries assuming that all actual warranty claims are settled at year end.

Question

Canadian Health Care Inc. provides a two-year assurance warranty on its products. Estimates are that warranty costs will be 3% of sales in the year of sale and 5% the following year. Sales and actual warranty costs for Canadian Health Care's first two years of operations were  Instructions 
a) Determine the warranty expense and warranty provision as at year end for 2020.
b) Determine the warranty expense and warranty provision liability as at year end for 2021.
c) Prepare all relevant journal entries assuming that all actual warranty claims are settled at year end.

Quizplus · Accepted Answer

The Answer of Canadian Health Care Inc. provides a two-year assurance warranty on its products. Estimates are that warranty costs will be 3% of sales in the year of sale and 5% the following year. Sales and actual warranty costs for Canadian Health Care's first two years of operations were  Instructions 
a) Determine the warranty expense and warranty provision as at year end for 2020.
b) Determine the warranty expense and warranty provision liability as at year end for 2021.
c) Prepare all relevant journal entries assuming that all actual warranty claims are settled at year end.