A Company Sells Personal Computers for $2,300 Each

Question 145
Essay

A company sells personal computers for $2,300 each. The price includes a two-year warranty. During the current year, the company sells 400 computers. On the basis of past experience, the warranty costs are estimated to be $250 per computer. The actual warranty costs (paid in cash) by the company during the current year were $65,000. Prepare general journal entries to record the (a) estimated warranty expense and (b) warranty repair costs during current year.