Question

Savory Co. sold $411,000 of equipment during January under a six-month warranty. The cost to repair defects under the warranty is estimated at 7.5% of the sales price. On August 15, a customer required a $391 part replacement, plus $122 of labor under the warranty.
Required:
a. Provide the journal entry for the estimated warranty expense on January 31 for January sales Jan. 31
b. Provide the journal entry for the August 15 warranty work.

Answer 1

Answer:

A.31-Jan

Dr Product Warranty Expense $30,825

Cr Product Warranty Payable $30,825

B. 15-Aug

Dr Product Warranty Payable $513

Cr Supplies $391

Cr Wages Payable $122

Explanation:

a. Preparation of the journal entry for the estimated warranty expense on January 31 for January sales Jan. 31

31-Jan

Dr Product Warranty Expense $30,825

(411,000*7.5%)

Cr Product Warranty Payable $30,825

b. Preparation of the journal entry for the August 15 warranty work

15-Aug

Dr Product Warranty Payable $513

($391+$122)

Cr Supplies $391

Cr Wages Payable $122