Hitzu Co. sold a copier costing $3,500 with a two-year parts warranty to a customer on August 16, 2018, for $7,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2019, the copier requires on-site repairs that are completed the same day. The repairs cost $106 for materials taken from the repair parts inventory. These are the only repairs required in 2019 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjusting entry at the end of each year.

1.$ 280

2. $280

3.$0

4. $174

5. (a) Aug 16 2018

Dr Cash 7,000

Cr Sales 7,000

(b) Aug 16 2018

Dr Cost of goods sold 3,500

Cr Merchandise inventory 3,500

(c) Aug 16 2018

Dr Warranty expense 280

Cr Estimated warranty liability 280

(d) Nov 22 2019

Dr Estimated warranty liability 106

Cr Repair part inventory 106

Step-by-step explanation:

1. Calculation for how much warranty expense does the company report in 2018 for this copier

Warranty Expense= 7,000 x 0.04

Warranty Expense= $280

2. Calculation for How much is the estimated warranty liability for this copier as of December 31, 2018

2018 Estimated Warranty liability= 7,000 x 0.04

2018 Estimated Warranty liability=$280

3. Calculation for How much warranty expense does the company report in 2019 for this copier

The company in the year 2019 report $0 warranty expense for the copier.

4. Calculation for How much is the estimated warranty liability for this copier as of December 31, 2019?

2019 Estimated warranty liability =280-106

2019 Estimated warranty liability =174

5. Preparation of the Journal entries to record (a) the copier sales (b) the Adjustment on Dec 31 2018 to recognize the warranty expense (c) the repairer that occured in November 2019

(a) Aug 16 2018

Dr Cash 7,000

Cr Sales 7,000

(b) Aug 16 2018

Dr Cost of goods sold 3,500

Cr Merchandise inventory 3,500

(c) Aug 16 2018

Dr Warranty expense 280

Cr Estimated warranty liability 280

(d) Nov 22 2019

Dr Estimated warranty liability 106

Cr Repair part inventory 106