Question

Sadler Corporation produces lawnmowers. The lawnmowers come with a three-year warranty. During 20X6, Sadler sold 20,000 lawnmowers that cost $5,800,000 to manufacture for $10,000,000 cash. Sadler’s accountant estimates that 10 percent will need to be repaired at some point over the next three years at an average cost of $37 per lawnmower.

a.Make the journal entry to record the sale of the lawnmowers in 20X6.

b.Record warranty expense for 20X6.

c.During 20X7, Sadler spends $24,000 to repair the lawnmowers. Record this.

d.At the end of 20X7, Sadler’s accountant reevaluates the warranty estimates. The accountant believes that the actual warranty liability may be higher than her original estimates. She now believes that an additional $17,000 should be added. Make the necessary journal entry.

e.During 20X8, Sadler spends $60,000 to repair the lawnmowers. Record this.

Answer 1

Journal entries are stated as below

Sr. no	Particulars	Dr	Cr
a	Cash Dr.	10,000,000
	to Sales		10,000,000
	(Sale of 20,000 lawnmovers in cash in 20X6)
b	Warranty expense Dr.	74,000
	to Warranty expense provision		74,000
	(Provision for 2,000 lawnmovers @$37 in 20X6)
c	Warranty expense provision Dr.	24,000
	To Cash		24,000
	(Amount spent to repairs the lawnmovers in 20X7)
d	Warranty expense Dr.	17,000
	to Warranty expense provision		17,000
	(Additional provision for warranty booked in 20X7)
e	Warranty expense provision Dr.	60,000
	To Cash		60,000
	(Amount spent to repairs the lawnmovers in 20X8)