At the beginning of 2009, Scarlet Industries began offering a 3-year warranty on its products. The warranty program was expected to cost Scarlet 2% of net sales, approximately equally over the three-year warranty period. Net sales made under warranty in 2009 were $270 million. Thirteen percent of the units sold were returned in 2009 and repaired or replaced at a cost of $2 million. This amount was debited to warranty expense as incurred.
Required:
Prepare the appropriate adjusting entry to adjust warranty expense on December 31, 2009. Show calculations.

Question

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The Answer of At the beginning of 2009, Scarlet Industries began offering a 3-year warranty on its products. The warranty program was expected to cost Scarlet 2% of net sales, approximately equally over the three-year warranty period. Net sales made under warranty in 2009 were $270 million. Thirteen percent of the units sold were returned in 2009 and repaired or replaced at a cost of $2 million. This amount was debited to warranty expense as incurred.
Required:
Prepare the appropriate adjusting entry to adjust warranty expense on December 31, 2009. Show calculations.

At the Beginning of 2009, Scarlet Industries Began Offering a 3-Year