Grain Company Sells a Product for $760

Essay

Grain Company sells a product for $760. When the customer buys it, Grain provides a one-year warranty. Grain sold 1,500 products during 2017. Based on analysis of past warranty records, Grain estimates that repairs will average 6% of total sales.

Required
1. Analyze the impact of the journal entry to record the estimated liability.
2. Assume that during 2017 products under warranty must be repaired using repair parts from inventory costing $49,600. Analyze the impact of the journal entry to record the repair of products.
3. Assume that the balance of the Estimated Liabilities for Warranties account as of the beginning of 2017 was $1,700. Calculate the balance of the account as of the end of 2017.