Compute the warranty expense

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Reference no: EM13938230

WARRANTIES

Mason Auto Repair specializes in the repair of foreign car transmissions. To encourage business, Mason offers a six-month warranty on all repairs. The following data are available for 2009:

Transmissions repaired, 2009	2,430
Expected frequency of warranty claims	0.07 per repair
Actual warranty claims, 2009	181
Estimated warranty liability, 1/1/09	$1,100
Cost of each warranty claim	21

Assume that warranty claims are paid in cash.

Required:

1. Compute the warranty expense for 2009.

2. Prepare the entry to record the payment of the 2009 warranty claims.

3. What is the December 31, 2009, balance in the estimated warranty liability account? Why has the balance in the estimated warranty liability account changed from January 1, 2009?

Reference no: EM13938230

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