Accounting for warranties, vacation, and bonuses McCarthy Industries completed t
ID: 2460362 • Letter: A
Question
Accounting for warranties, vacation, and bonuses
McCarthy Industries completed the following transactions during 2014:
Nov 1
Made sales of $18,000. McCarthy estimates that warranty expense is 4% of sales. (record only the warranty expense)
20
Paid $100 to satisfy warranty claims
Dec31
Estimated vacation benefits expense to be $1,200
31
McCarthy expected to pay its employee a 2% bonus on net income after deducting the bonus. Net income for the year is $20,000
Journalize the transaction (explanations are the required)
Nov 1
Made sales of $18,000. McCarthy estimates that warranty expense is 4% of sales. (record only the warranty expense)
20
Paid $100 to satisfy warranty claims
Dec31
Estimated vacation benefits expense to be $1,200
31
McCarthy expected to pay its employee a 2% bonus on net income after deducting the bonus. Net income for the year is $20,000
Explanation / Answer
Solution-
McCarthy Industries Journal Entries S.No. Date Description Post reference Debit ($) Credit($) 1 1-Nov Warranty expense A/c 720 Estimated Liability under Warranties A/c 720 (For Recording warranty expense is 4% of sales @18,000) 2 20-Nov Estimated Liability under Warranties A/c 100 Cash A/c 100 (For Paid $100 to satisfy warranty claims) 3 31-Dec Vacation benefits expense A/c 1,200 Estimated vacation benefits expense A/c 1,200 (For recording Estimated vacation benefits expense) 4 31-Dec Bonus A/c 392 Extiamted Bonus A/c 392 (For recording 2% bonus on net income after deducting the bonus i.e 20,000*2/102)