Nissan USA guarantees automobiles against defects for 4 years or 50,000 miles, whichever comes first. Suppose Nissan can expect warranty costs during the 4 year period to add up to 3% of sales.
Assume that Lakeland Nissan in Lakeland, florida, made sales of 500,000 during 2000. Lakeland Nissan received cash for 10% of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totaled 12,000 during 2000.
1) Record the sales, warranty expense, and warranty payments for Lakeland Nissan. Ignore any reimbursements that Lakeland Nissan may receive from Nissan USA.
2) Post to the Estimated Warranty Payable T-account. The Beginning balance was 10,000. At the end of 2000, how much in estimated warranty payable does Lakeland Nissan owe its customers?

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