ABC Ltd. Sells merchandise for $200,000. During 2014 ABC's merchandise carries a one-year unconditional warranty for parts and labour. The warranty expense is estimated $1,200 in this year.
In 2015, ABC incurs costs of $850 to repair or replace defective merchandise. ABC sells another $240,000 worth of merchandise. The warranty expense assumes to use an estimate of 0.4% of sales in 2015. Prepare the journal entry 2014,2015