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Big Wave Marine Products had sales revenue of $850,000 for the year-ended December 31, 2017. The units sold were covered by a two-year warranty and Big Wave began 2017 with a warranty liability balance of $11,600. Big Wave's management team estimated that the units sold in 2017 would result in future warranty claims in the amount of 4% of sales revenue and during 2017. Big Wave spent $34,800 servicing customer warranty claims.


Write down the that Big Wave will record in 2017 for warranty expense.

Respuesta :

jepessoa

Answer:

$34,000

Explanation:

the journal entry to record the warranty expense would be:

Dr Warranty expense 34,000

    Cr Warranty liability 34,000

The warranty liability account covers products sold during the current and previous year (until the 2 year warranty period is over). It is a permanent liability account that changes over time, while the warranty expense account is a temporary account and is recorded when the goods are sold.  

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