Swifty Company sells automatic can openers under a 75-day warranty for defective merchandise. Based on past experience, Swifty estimates that 4% of the units sold will become defective during the warranty period. Management estimates that the average cost of replacing or repairing a defective unit is $25. The units sold and units defective that occurred during the last 2 months of 2020 are as follows:
Months Units Sold Units Defective Prior to December 31
November 37,300 746
December 39,300 491
Required:
Prepare the journal entries to record the estimated liability for warranties and the costs incurred in honoring 1,237 warranty claims. (Assume actual costs of $24,740.)
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Swifty Company sells automatic can openers under a 75-day warranty for defective merchandise. Based...
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