Question

In: Accounting

Estimated Warranty Liability Cook-Rite Co. sold $541,000 of equipment during January under a one-year warranty. The...

Estimated Warranty Liability

Cook-Rite Co. sold $541,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 6% of the sales price. On August 15, a customer required a $348 part replacement, plus $174 of labor under the warranty.

Required:

(a) Provide the journal entry for the estimated warranty expense on January 31 for January sales.

Jan. 31 Product Warranty Expense
Product Warranty Payable

(b) Provide the journal entry for the August 15 warranty work. If an amount box does not require an entry, leave it blank.

Aug. 15

Solutions

Expert Solution

Date Account titles and Explanation Debit ($) Credit ($)
Jan. 31 Product Warranty Expense(541,000*6%)                     32,460
             Product Warranty Payable                32,460
( To record the estimated warranty expense)
Aug. 15 Estimated warranty liability                        522
             Supplies                348
             Wages payable                174
( To record Warranty Claims by customer)

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