Essay: Adjusting the Amount of Warranty Expenses

Sample Essay

(To adjust the amount of warranty expenses)

5.         Sales                                                                                        $100,000

Accounts Receivable                                                                          $100,000

(To rectify entry for credit sales)

6.         Returns expense                                                                      $10,300

Allowance for Returns                                                                        $10,300

(To adjust allowance for returns)

7.         Doubtful accounts expense                                                     $5,960

Allowance for doubtful accounts                                                       $5,960

(To adjust allowance for doubtful accounts)

B.

Schedule for Computation of Correct Net Income
Reported Net Income		252,687
Add: decrease in Cost of Goods Sold		6,300
Less: decrease in Merchandise Inventory	60,000
Less: Warranty Expenses	20,000
Less: Decrease in Sales	100,000
Less: Returns Expense	10,300
Less: Doubtful accounts expense	5,960	(196,260)
Adjusted Net Income		62,727

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