Question : marks
Shelford Cutlery extends a lifetime replacement warranty on all units sold. Using past
experience, the company estimates that of units sold will be returned and require
replacement at an average cost of $ per unit. On January the balance in Shelford's
Warranty Liability account was $ During sales totalled $ or units.
The actual number of units returned and replaced was
Required:
a Prepare the journal entry to accrue the estimated warranty costs for
b Prepare the summary journal entry to record the warranty contracts honored during
for units that were returned for replacement.
c Calculate the balance in the Warranty Liability account at December
d What is the amount of warranty expense that will appear on the income statement for the
year ended December
