Answer:
Dr Warranty Expense 7,400
Cr Estimated Warranty Liability 7,400
Explanation:
Based on the information given we were told that the company estimated that the warranty expense will be 4% of sales in which the sales for the current period was the amount of $185,000. Therefore the current period's Journal entry to record the warranty expense is:
Dr Warranty Expense 7,400
Cr Estimated Warranty Liability 7,400
(185,000 x 0.04 = 7,400)
The journal entry for recording the warranty expense is
Dr Warranty Expense 7,400
Cr Estimated Warranty Liability 7,400
Dr Warranty Expense 7,400 (185,000 x 0.04)
Cr Estimated Warranty Liability 7,400
(being warranty expense is recorded)
here expense is debited as it increased the expense and liability should be credited as it also increased the liability.
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