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Listed below are a few transactions and events of Maxum Company. Employees earn vacation pay at a rate of one day per month. Maxum estimated and must expense $13,000 of accrued vacation benefits for the year. During December, Maxum Company sold 12,000 units of a product that carries a 60-day warranty. December sales for this product total $460,000. The company expects 10% of the units to need warranty repairs, and it estimates the average repair cost per unit will be $15. Prepare adjusting entries at December 31 for Maxum Company’s year-end financial statements for each of the above separate transactions.

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Tundexi

Answer:

                               General Journal

Date    Account Title and Explanation      Debit        Credit

           Vacation Benefit Expense              $13,000

                 Vacation Benefit Payable                           $13,000

          (Being accrued vacation liability made due)  

           Warranty Expense                            $18,000  

                  Estimated Warranty Liability                      $18,000

                  ($12,000 × 10 % × $15)

           (Being accrued warranty liability raised )

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