Loco Camping Supplies offers a 60-day exchange policy on all of the products it sells. Loco estimates that 2.5% of its total sales will be returned for exchange each month.
During May, Loco sold 1,000 tents for $250 each. Loco had purchased the tents from a regional supplier for $100 each. In June, 20 tents were returned for exchange by customers.
a. Provide the journal entry to record the warranty expense related to tent sales for May.
b. Provide the journal entry to record the 20 tents exchanged in June.