Question

QS 9-9 Recording warranty repairs LO P4 On September 1, Home Store sells a mower (that costs $220) for $520 cash with a one-year warranty that covers parts. Warranty expense is estimated at 8% of sales. On January 24 of the following year, the mower is brought in for repairs covered under the warranty requiring $36 in materials taken from the Repair Parts Inventory. Prepare the September 1 entry to record the mower sale (and cost of sale) and the January 24 entry to record the warranty repairs. (Round your answers to 2 decimal places.)

Answer 1

Answer and Explanation:

The journal entries are shown below:

On September 1

Cash $520

      Sales $520

(Being the sale is recorded)

On September 1

Cost of goods sold $220

    To  Merchandise inventory $220

(Being the cost is recorded)

On September 1

Warranty expense $41.6  ($520 × 8%)  

   To Estimated warranty liability  $41.60

(Being the warranty expense is recorded)

On July 24

Estimated warranty liability $36  

        To Repair parts inventory $36

(Being the estimated warranty liability is recorded)