Solution 1:
|
Journal Entries - Marina Boats |
|
Event |
Particulars |
Debit |
Credit |
|
a |
Cash Dr |
$108,680.00 |
|
|
|
Note receivables Dr |
$385,320.00 |
|
|
|
To Sales revenue |
|
$494,000.00 |
|
|
(To record sales revenue) |
|
|
|
|
|
|
|
|
b |
Warranty expense Dr ($494,000*9%) |
$44,460.00 |
|
|
|
To Estimated warranty
payable |
|
$44,460.00 |
|
|
(To record warranty provision) |
|
|
|
|
|
|
|
|
c |
Estimated warranty payable Dr |
$20,800.00 |
|
|
|
To Cash |
|
$20,800.00 |
|
|
(To
record warranty payments) |
|
|
Solution 2:
|
Estimated Warranty Payable |
|
Particulars |
Debit |
Particulars |
Credit |
|
Cash |
$20,800.00 |
Warranty expense |
$44,460.00 |
|
Ending balance |
$23,660.00 |
|
|
|
|
|
|
|
|
Total |
$44,460.00 |
Total |
$44,460.00 |
At the end of the first year, estimated warranty payable Marina
owe its customers = $23,660
Solution 3:
Marina will report warranty expense of $44,460 during first year
of its operation. No, warranty expense for the year higher than
year's cash payments for warranties. Matching accounting principle
addresses this situation.
