Flag prepares monthly financial statements. Flag promises the customers a new model ship if they are unhappy at any time in the first 2 years after the purchase. Flag estimates that 6% of the ships need replaced, on average. During May Flag Inc. sells 1,000 model ships for $50 each. The cost of each ship to Flag is $20. During May- Flag replaces 40 ships that were sold in prior months and were under warranty. What will Flag recognize as warranty expense for May?

Exercise 7-7 martinez company reports the following financial information before adjustments. dr. cr. accounts receivable $168,900 allowance for doubtful accounts $3,200 sales revenue (all on credit) 849,300 sales returns and allowances 50,440 prepare the journal entry to record bad debt expense assuming martinez company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but allowance for doubtful accounts had a $1,550 debit balance. (if no entry is required, select "no entry" for the account titles and enter 0 for the amounts. credit account titles are automatically indented when the amount is entered. do not indent manually.)