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Question: marinamarina boats guarantees its boats for three years or 1500...

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marinamarina Boats guarantees its boats for three years or 1,500 hours, whichever comes first. Industry experience indicates that MarinaMarina can expect warranty costs will equal 9 percent of sales. Assume in its first year,MarinaMarina Boats had sales totaling $494,000 ,receiving cash for 22 percent of sales and notes receivable for the remainder. Warranty payments totaled $20,800

during the year.

1.

Record the sales, warranty expense, and warranty payments for

MarinaMarina

Boats. Ignore cost of goods sold.

2.

Post relevant portions of the journal entries to the Estimated warranty payable T-account. At the end of the first year, how much in estimated warranty payable does

MarinaMarina

owe its customers?

3.

What amount of warranty expense will

MarinaMarina

report during its first year of operations? Does the warranty expense for the year equal the year's cash payments for warranties? Which accounting principle addresses this situation?
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