Warranty Liabilities P4.
{"Image DocumentName": "Warranty LiabilitiesP4.", "Image ImageDescription": "A dealer sells a car for  32,000, on December 1, 2009, with a warranty for parts and labor for 12 months, or 12,000 miles. The dealership experiences an average warranty cost of 3% of the selling price of each car. On February 15, 2010, parts of  200 and labor of  250 covered under warranty were incurred. Part One On the date of sale, December first, the dealership will debit warranty expense and credit the current liability account, estimated warranty liability, for nine hundred sixty dollars. The amount of the estimated liability is determined by multiplying the thirty-two thousand dollar cost of the car times the three percent historical warranty cost percent. Part Two On February fifteenth, 2010, the dealership paid two hundred dollars for parts and two hundred fifty dollars for labor covered by the warranty. Can you prepare the proper journal entry? It is a little tough, so take your time. Part Three On February fifteenth, the dealership will debit, or reduce, the estimated warranty liability for total costs incurred of four hundred fifty dollars. We will credit the auto parts inventory for two hundred dollars, and salaries payable for two hundred fifty dollars", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}