In: Accounting
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 $174 of labor under the warranty.
Required:
(a) Provide the journal entry for the estimated warranty expense on January 31 for January sales.
Jan. 31 | Product Warranty Expense | ||
Product Warranty Payable |
(b) Provide the journal entry for the August 15 warranty work. If an amount box does not require an entry, leave it blank.
Aug. 15 | |||
Date | Account titles and Explanation | Debit ($) | 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) |