Question

Fosters Manufacturing Co. warrants its products for one year. The estimated product warranty is 6% of sales. Assume that sales were $500,0000 for January. On February 7, a customer received warranty repairs requiring $140 of parts and $65 of labor. 

Required: 

a. Journalize the adjusting entry required at January 31, the end of the first month of the current fiscal year, to record the accrued product warranty. Refer to the Chart of Accounts for exact wording of account titles. 

b. Journalize the entry to record the warranty work provided in February. Refer to the Chart of Accounts for exact wording of account titles. 

Answer 1

a
Date	Description	Debit	Credit	Assets	Liabilities	Equity
January 31	Product Warranty expense	30000				↓
	Product Warranty payable		30000		↑
b
Date	Description	Debit	Credit	Assets	Liabilities	Equity
February 7	Product Warranty payable	205			↓
	Supplies		140	↓
	Wages Payable		65		↑