Question

Whispering Company sells a machine for $6,720 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 620 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 $363 per machine ($158 parts and $205 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?

Part 3

Warranty costs incurred in 2018. (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

Account Titles and Explanation	Debit	Credit

please show work

Answer 1

ANSWER:

	Warranty expense	112,530
	Warranty liability [(620*$363) / 2]		112,530

Explanation

	Accounts titles and Explanation	Debit ($)	Credit ($)
	Cash	4,166,400
	Sales revenue ($6720*620)		4,166,400
	Warranty expense [(620*$363) / 2]	112,530
	Inventory [(620*$158) / 2]		48,980
	Salary and wages payable [(620*$205) / 2]		63,550

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