Question

Accrued Product Warranty

Parker Manufacturing Co. warrants its products for one year. The estimated product warranty is 5% of sales. Assume that sales were $183,000 for January. In February, a customer received warranty repairs requiring $165 of parts and $85 of labor.

For a compound transaction, if an amount box does not require an entry, leave it blank.

a. Journalize the adjusting entry required at January 31, the end of the first month of the current fiscal year, to record the accrued product warranty.

b. Journalize the entry to record the warranty work provided in February.

Answer 1

Based on the information available in the question, we can record the journal entries as follows:-

Requirement A:-

The amount of estimated product warranty is :- $183,000 * 5% = $9,150

	Particulars	Debit	Credit
a.)
January 31	Warranty expense A/c Dr.($183,000 * 5%)	9,150
	To Estimated Warranty liability A/c		9,150
	(To record the estimated warranty liability for the sales made)

Requirement B:-

The journal entry to record the warranty work provided in February is :-

b.)
December 31, 2021	Estimated Warranty Liability A/c Dr.	250
	To Inventory A/c		165
	To Cash A/c		85
	(To record the warranty expense)

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