A Company Sells Its Product Subject to a Warranty That

Essay

A company sells its product subject to a warranty that covers the cost of parts and labour for repairs during the six months after sale.Warranty costs are estimated to be 4.5% of sales for parts,and 1.5% of sales for labour.During the month of June,the company performed warranty work and used $8,000 worth of parts and paid $4,000 in wages for labour to do the warranty work.Sales for June amounted to $450,000.
(1)What account should be debited for the $4,000 in labour?
(2)What should be the amount of estimated warranty expense for June?
(3)If the Estimated Warranty Liability account had a $10,000 credit balance on May 31,what should be the account balance as of June 30?