Question

Accrued Product Warranty Fosters Manufacturing Co. warrants its products for one year. The estimated product warranty is 3% of sales. Assume that sales were $211,000 for January. On February 7, a customer received warranty repairs requiring $170 of parts and $70 of labor. 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. If an amount box does not require an entry, leave it blank. b. Journalize the entry to record the warranty work provided in February. If an amount box does not require an entry, leave it blank.

Answer 1

Answer:

a.

Warranty Expenses $6,330 (debit)

Provision of Warranty Expense $6,330 (credit)

b.

Provision of Warranty Expense $240 (debit)

Raw Materials : Parts $170 (credit)

Labor $70 (credit)

Explanation:

Entry to record the warranty estimate for the year :

Hint : Recognize an Expense : Warranty Expenses and a Liability : Provision of Warranty Expense

Warranty Expenses $6,330 (debit)

Provision of Warranty Expense $6,330 (credit)

Warranty Expenses Calculation = $211,000 × 3% = $6,330

When customer received warranty cost

Hint : Utilize the Provision that had been previously recognized.

Provision of Warranty Expense $240 (debit)

Raw Materials : Parts $170 (credit)

Labor $70 (credit)