Computer Wholesalers restores and resells notebook computers. It originally acquires the notebook computers from
corporations upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against
defects. Based on previous experience, Computer Wholesalers expects warranty costs to be approximately 6% of sales.
Sales for the month of December are $600,000. Actual warranty expenditures in January of the following year were
$13,000.

Required:

1, Does this situation represent a contingent liability? Why or why not?

2 Record warranty expense and warranty liability for the month of December based on 6% of sales.

3. Record the payment of the actual warranty expenditures of $13.000 in January of the following year.

4. What is the balance in the Warranty Liability account after the entries in Requirements 2 and 3?

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.

Answer Link

Parrain Parrain · Answer 2 · 2022-04-05T15:16:30+02:00

In regards to if the situation represents a contingent liability, the answer is yes, it does.

The journal entry to record the warranty expense is:

Date Account Title Debit Credit

Warranty expense $36,000

Warranty liability $36,000

The journal entry for the payment of the warranty expenditures:

Date Account Title Debit Credit

Warranty liability $13,000

Cash $13,000

The balance in the warranty liability account would be $23,000.

What are the warranty entries for Computer Wholesalers?

Warranties are considered a contingent liability because they are likely to be incurred.

The warranty expense is:

= 600,000 x 6%

= $36,000

The warranty liability account balance would be:

= 36,000 - 13,000

= $23,000

Find out more on contingent liability at https://brainly.com/question/7041428.