Concord Factory provides a 2-year warranty with one of its products which was first sold in...
Concord Factory provides a 2-year warranty with one of its products which was first sold in 2017. Concord sold $932,500 of products subject to the warranty. Concord expects $137,130 of warranty costs over the next 2 years. In that year, Concord spent $66,530 servicing warranty claims. Prepare Concord’s journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs.
Homework Answers
Journal entry in 2017
| Cash / Accounts receivable | $ 932,500 | |
| Sales revenue | $ 932,500 | |
| Warranty expanse | $ 66,530 | |
| Inventory | $ 66,530 |
Adjusting entry
| Dec-31 | Warranty expense ($137,130-$66,530) | $ 70,600 | |
| Warranty liabilities | $ 70,600 |
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