158. March Company is a European family-owned equipment business. Assume that March provides a two-year warranty on its products and that March estimates current year warranty costs to be 4% of sales...

158. March Company is a European family-owned equipment business. Assume that March provides a two-year warranty on its products and that March estimates current year warranty costs to be 4% of sales revenues. At the end of last year, March’s balance sheet carrying value of estimated warranty liabilities was €35,000. March will incur actual warranty costs over the two years following the time of sale. Assume that sales (all on account) and actual warranty expenditures (all paid in cash) were as follows:

REQUIRED:


a.
Prepare journal entries to recognize sales revenues, warranty costs, and warranty expenditures in for the two years. Closing entries are not required.

b.
What is the balance in the Warranty Liability account at the end of the current year?

159. Cool Pools Construction installs swimming pools. They calculate that warranty obligations are 3% of gross sales. For the year just ending Cool Pools’ gross sales were $1,450,000. Due to previous quarter recognitions, the Warranty Liability account has a credit balance of $28,700.




REQUIRED:


Determine the year’s total warranty liability and journalize any necessary value to establish the year’s liability at December 31st.