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14 July, 12:47

Stable Enterprises had sales of $230,000 in Year 1. Stable warrants its products and estimates warranty expense to be 4% of sales. In Year 2 Stable paid $9,000 cash to settle warranty obligations. Which of the following journal entries would be required to recognize the settlement of the warranty obligations?

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  1. 14 July, 16:09
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    Warranty payable=Debit=9000

    Cash=Credit=9000

    Explanation:

    Given

    Sales = $230,000 in one year

    Warranty expense = 4% of sales

    Cash paid to settle warranty obligations = $9,000

    The journal entries required to recognize the settlement of the warranty obligations=?

    Warranty payable=Debit=9000

    Cash=Credit=9000

    Warranty is a written statement or promise given by the manufacturer or seller of a product to the customer to repair or replace the product in case of any fault or damage within specific period of time.
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