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 $205 labor). Use "Inventory" account to record the warranty expense.
Sale of machinery and warranty expense incurred in 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation |
Debit |
Credit |
(To record sale) |
||
(To record warranty expense) |
Assuming that actual warranty costs are incurred exactly as
estimated, what journal entries would be made relative to the
following facts?
please show work
Solution:
No. | Account title and Explanation | Debit($) | Credit($) |
1. | Cash | 4,166,400 | |
Sales Revenue (620 units × $6,720) | 4,166,400 | ||
(To record sale) | |||
2.) | Warranty expenses | 112,530 | |
Inventory ($158/ unit × 620 units × 50% incurred) | 48,980 | ||
Salaries and wages payable ($205 × 620 units × 50%) | 63,550 | ||
(To record warranty costs incurred in 2017) | |||
3.) | Warranty expenses | 112,530 | |
Warranty liability | 112,530 | ||
( To record warranty expenses charged against 2017 revenues) | |||
4.) | Warranty liability | 112,530 | |
Inventory | 48,980 | ||
Salaries and wages payable | 63,550 |
(To record warranty costs incurred in 2018) |
Whispering Company sells a machine for $6,720 with a 12-month warranty agreement that requires the company...
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...
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...
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...
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