Question

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Flounder Factory provides a 2-year warranty with one of its products which was first sold in 2020. Flounder sold $976,100 of products subject to the warranty. Flounder expects $119,940 of warranty costs over the next 2 years. In that year, Flounder spent $64,080 servicing warranty claims. Prepare Flounder’s journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs. (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.)

Date	Account Titles and Explanation	Debit	Credit
2020
	(To record sales)
During 2020
	(To record warranty claims)
12/31/20

Answer 1

Date	Account Titles and Explanation	Debit	Credit
2020	Cash / Accounts receivable	$976,100
	Sales		$976,100
	(To record sales)
During 2020	Warranty Expense	$64,080
	Inventory		$64,080
	(To record warranty claims)
12/31/20	Warranty Expense	$55,860
	Warranty Liabilities		$55,860
	(To record expected warranty liability) ($119940-64,080)