Question

Hardin Widget Manufacturing began operations in January 2021. Hardin sells widgets that carry a two-year manufacturer's warranty against defects in workmanship. Hardin's management projects that 2% of the widgets will require repair during the first year of the warranty while approximately 6% will require repair during the second year of the warranty. The widgets sell for $400 each. The average cost to repair a widget is $60. The company sells 60% of the widgets to retail customers who must pay a 6% sales tax. Sales and warranty information for 2021 and 2022 are as follows: 2021: Sold 120 widgets on account; incurred warranty expenditures of $220 for widget repairs. 2022: Sold 220 widgets on account; actual payments for warranty expenditures were $420. Required: 1. Prepare journal entries that summarize the sales and any aspects of the warranty for 2021. 2. Prepare journal entries that summarize the sales and any aspects of the warranty for 2022 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare journal entries that summarize the sales and any aspects of the warranty for 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet < 1 2 3 Record the entry for summarize the sales for 2021.

Answer 1

Requirement 1: Date Accounts title Debit Credit Accounts receivable $ 49,728 Year 2021 Sales ( 120 x $400 ] $ 48,000 Sales tax payable [ 48,000 x 60% x 6%] $ 1,728 [To record the sales on account where customer accounts were debited and sales tax was collectible from customers] Year 2021 Warranty expense 576 Estimated warranty libility 576 [ 120 x ( 2% +6% ) x $60] [ To record estimated warranty liability] Note : Estimated warranty for the year 2021 sales is 2% in first year and 6% in next year. Therefore we need to create liability for the both the years pertaining to year 2021 sales. 220 Year 2021 Estimated warranty liability cash, supplies,parts etc OR inventory [To record warranty claimed by customers ] 220

Requirement 2: Year 2022 Date Accounts title Debit Credit Accounts receivable $ 91,168 Year 2022 Sales [ 220 x $400 ] $ 88,000 Sales tax payable [ 48,000 x 60% x 6% ] $ 3,168 [To record the sales on account where customer accounts were debited and sales tax was collectible from customers] $ 1,056 $ 1,056 Year 2021 Warranty expense Estimated warranty libility [220 x ( 2% +6% ) x $60] [To record estimated warranty liability] 420 Year 2021 Estimated warranty liability cash, supplies, parts etc OR inventory [ To record warranty claimed by customers ] I$ 420