In the most recent year of operations, Bradley's Video Games sold merchandise costing $25,000 for $ 75,000. All merchandise was sold under a one-year warranty. At the time of sale, Bradley estimated that warranty claims would amount to 3% of sales. During the year, Bradley replaced defective merchandise for $1,290. All transactions were cash transactions.
Required:
a. Prepare journal entries to record all transactions related to the warranty.
b. Based solely on the above information, determine Bradley's operating income for the year.

Question

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The Answer of In the most recent year of operations, Bradley's Video Games sold merchandise costing $25,000 for $ 75,000. All merchandise was sold under a one-year warranty. At the time of sale, Bradley estimated that warranty claims would amount to 3% of sales. During the year, Bradley replaced defective merchandise for $1,290. All transactions were cash transactions.
Required:
a. Prepare journal entries to record all transactions related to the warranty.
b. Based solely on the above information, determine Bradley's operating income for the year.

In the Most Recent Year of Operations, Bradley's Video Games