Aplus appliances sells dishwashers with a fourminusyear warranty. in 2019, sales revenue for dishwashers is $ 88 comma 000. the company estimates warranty expense at 4.5% of revenues. what is the total estimated warranty payable of a plus appliances as of december 31, 2019? a plus applicances began operating in 2019.

Warranty Expense       (Debit)   $3,960

Warranty Liability                                        (Credit) $3,960

Explanation:

The principle we apply while making entries for standard warranty is this:

The estimated amount of warranty expense, which a company founds as a percentage of its sales from historical claims and data, is taken as benchmark to accrue the warranty expense in the period when the sale is made (matching principle) .

In our question, 4.5% is the estimated warranty expense.

The company then sets off the estimated warranty expense (Debit)

(4.5% * $88,000 = $3,960)

with the warranty liability (Credit) to entertain any claims in future.