Milner Company Is Preparing Adjusting Entries at December 31

Essay

Milner Company is preparing adjusting entries at December 31. An analysis reveals the following:
1. During December, Milner Company sold 8,900 units of a product that carries a 60-day warranty. The sales for this product totalled $ 200,000. The company expects 5% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $ 30.
2. The company has been sued by a disgruntled employee. Legal counsel believes it is likely that the company will have to pay $ 150,000 in damages.
3. The company has been named as one of several defendants in a $ 350,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.
4. During December, ten employees earn vacation pay at a rate of 1 day per month. Their average daily wage is $ 160 per employee.
Instructions
Prepare adjusting entries, if required, for each of the four items.