Question

Accrued Product Warranty Fosters Manufacturing Co, warrants its products for one year. The estimated product warranty is 5% of sales. Assume that sales were $424,000 for January, On February 7, a customer received warranty repairs requiring $300 of parts and $80 of labor. 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. If an amount box does not require an entry, leave it blank. b. Journalize the entry to record the warranty work provided in February. If an amount box does not require an entry, leave it blank. 6 more Check My Work uses remaining.

Answer 1

Estimated product warranty liability = Sales x Percentage of warranty

= 424,000 x 5%

= $21,200

a.

Journal

Account Title and Explanation	Debit	Credit
Warranty expense	21,200
Estimated warranty liability		21,200

b.

Journal

Account Title and Explanation	Debit	Credit
Estimated warranty liability	380
Repair parts		300
Wages expense		80

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