Question

Splish Company sells a machine for $7,300 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the company sells 640 machines in 2017 (warranty expense is incurred half in 2017 and half in 2018). As a result of product testing, the company estimates that the warranty cost is $357 per machine ($148 parts and $209 labor). Use "Inventory" account to record the warranty expense. Assuming that actual warranty costs are incurred exactly as estimated, what journal entries would be made relative to the following facts?

(a) Sale of machinery and warranty expense incurred in 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (To record sale) (To record warranty exp

Answer 1

Account titles and explanation		Debit(in $)	Credit(in $)
Cash(640 machines*$7,300)		46,72,000
Sales Revenue			46,72,000
(To record sales)
Warranty expenses(640 units*$357*50%)		1,14,240
Inventory(640 units*$148*50%)			47,360
Sales and wages payable(640 units*$209*50%)			66,880
(To record warranty expenses)