Mason Auto Repair specializes in the repair of foreign car transmissions. To enc
ID: 2409813 • Letter: M
Question
Mason Auto Repair specializes in the repair of foreign car transmissions. To encourage business, Mason offers a 6-month warranty on all repairs. The following data are available for 2019:
Assume that warranty claims are paid in cash.
Required:
1. Compute the warranty expense for 2019.
$
2. Prepare the entry to record the payment of the 2019 warranty claims.
3. Conceptual Connection: What is the December 31, 2019, balance in the estimated warranty liability account?
$
Why has the balance in the estimated warranty liability account changed from January 1, 2019?
The balance has because more claims were than were through warranty expense.
Transmissions repaired, 2019 3,600 Expected frequency of warranty claims 0.03 per repair Actual warranty claims, 2019 $39,000 Estimated warranty liability, 1/1/19 $31,100 Estimated cost of each warranty claim $330Explanation / Answer
1. Warranty expenses for 2019 Transmissions repaired in 2009 3600 Expected frequency of warranty claims 0.03 per repair Expected warranty claims 108 Estimated cost of each warranty claims $330 Warranty expenses for 2019 $35,640 2. Entry to record the payment of the 2019 warranty claims Warranty liability $39,000 Cash/Inventory $39,000 (Record payment of claims) 3. Balance in Estimated Warranty liability account Balance on 1/1/19 $31,100 Addittion during the year $35,640 Less: Actual warranty claims paid in 2019 ($39,000) Balance on 31/12/2019 $27,740