Can someone help me with my psp warranty?

Calculating warranty expenses, can someone please help?

• a) what amount of warranty liability would be shown on the May 31 balance sheet? b) What amount of warranty expense would be shown on the June income statement> c) What effect does recording the warranty expense have on owner's equity? d) What effect did spending the $1,050 in June have on owner's equity? The following took place during the month of May at ABC Co. - ABC sold $50,000 worth of its own brand of tv. Each tv is guaranteed for 12 months. Any defective tv will be repaired or replaced free of charge during that period. - The company has estimated that it will cost $5,000 during the next year to honour the warranties on the May sales. - During June, ABC Co. spent $1,050 to honour warranties related to May sales. - The company did not sell any tv's during June.

• Answer:

  You should be able to tell by the journal entries. - ABC sold $50,000 worth of its own brand of tv. Each tv is guaranteed for 12 months. Any defective tv will be repaired or replaced free of charge during that period. Dr Cash(or Accounts Receivable 50,000 Cr Sales 50,000 - The company has estimated that it will cost $5,000 during the next year to honour the warranties on the May sales. According to the matching principle, expenses should be matched to the revenues in the period in which they were earned. Since all of the revenues were earned in May, all of the warranty expense for those revenues should also be recognized in May. Dr Warranty Expense 5,000 (increase expense, decrease owner's equity) Cr Estimated Liability under Warranties 5,000 (Increase liability) - During June, ABC Co. spent $1,050 to honour warranties related to May sales. Dr Estimated Liability under Warranties 1,050 (decrease liability) Cr Cash and or Inventory, and or Accrued Payroll 1,050 (decrease asset) a) what amount of warranty liability would be shown on the May 31 balance sheet? $5,000 b) What amount of warranty expense would be shown on the June income statement? Zero. The full expense would be taken on the May income statement. c) What effect does recording the warranty expense have on owner's equity? Decrease $5,000. d) What effect did spending the $1,050 in June have on owner's equity? No effect. It only decreased liabilities and assets.