DeeDee added a one-year warranty to one of her computer games this year. The total...
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Accounting
DeeDee added a one-year warranty to one of her computer games this year. The total cost of warranty service on 2017 sales is estimated to be $10,122. During 2017, $4,750 was reimbursed to customers for warranty issues in 2017 sales and recorded as warranty expense.
DeeDee uses the FIFO inventory method to value inventory. The inventory balance of $187,500 was based on a physical count as of 12/31/2017. Based on your analysis, you have noted that $12,500 worth of marketing kits belonging to Marketing Majors Inc. were included in the account. You also note that the goods were in transit from a supplier on December 31, 2017. The cost of inventory was $16,200 and the goods were shipped fob point of shipment on December 29, 2017.
DeeDee has a direct tax rate of 28%. The income tax expense is Net Income before taxes multiplied by 28%.
Prepare the income statement to net income before taxes, and then record this adjusting journal entry.
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