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 4,900 units of a product that carries a 60-day warranty. The sales for this product totalled $100,000. The company expects 6% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $15.
2. The company has been sued by a disgruntled employee. Legal counsel believes it is likely that the company will have to pay $200,000 in damages.
3. The company has been named as one of several defendants in a $400,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.
Instructions
Prepare adjusting entries, if required, for each of the three items.