Timeless Ltd produces clocks and sells them with a one-year warranty

Accounting May 17, 2021

Timeless Ltd produces clocks and sells them with a one-year warranty. The warranty provision account currently has a debit balance of $4,000. The estimated cost of repairing clocks that have already been sold is $18,000. The adjustment needed to update the warranty provision account is:

a. Debit $18,000.

b. Credit $18,000.

C. Debit $22,000.

d. Credit $22,000.

e. Debit $14,000.

Expert Solution

Answer:

Beginning warranty provision balance = $4000 (debit)
Required ending balance = $18000 (credit)

Therefore requirement of adjustment = $4000+18000
= Credit $22000

Correct Option = d. Credit $22000

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