A Company Sells Computers with a 6-Month Warranty

Essay

A company sells computers with a 6-month warranty. In January, the company sold 100,000 computers at $1,750 each; and 1,500 computers were turned in for repairs during that same month. The total repairs amounted to $185,000 costs from the computer parts inventory. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. Prepare the journal entries to record (a) estimated warranty expense for January and (b) warranty repair costs for January.