B) Warranties Presley Company sells a product that includes a one-year warranty on parts and labor. During the year, 10,000 units are sold. Presley expects that 3% of the units will be defective and...

B) Warranties

Presley Company sells a product that includes a one-year warranty on parts and labor. During the year, 10,000 units are sold. Presley expects that 3% of the units will be defective and that the average warranty cost will be $50 per unit. Actual warranty costs incurred during the year were $14,000.

Instructions

Prepare the journal entries to record (a) the estimated warranty costs and (b) the actual costs incurred.