Question

On September 1, Home Store sells a mower (that costs $310) for $610 cash with a one-year warranty that covers parts. Warranty expense is estimated at 9% of sales. On January 24 of the following year, the mower is brought in for repairs covered under the warranty requiring $43 in materials taken from the Repair Parts Inventory.
Required:
Prepare the September 1 entry to record the mower sale (and cost of sale) and the January 24 entry to record the warranty repairs.

Answer 1

Answer:

Sale of the mower sale (and cost of sale) and Warranty expense.

Date                  Details                                                  Debit                 Credit

September 1,     Cash                                                     $610

                          Sales                                                                             $610

September 1,     Cost of Goods sold                              $310

                           Finished goods inventory                                            $310

September 1,     Warranty expense                                $54.90

                           Warranty liability                                                       $54.90

January 24,       Warranty Liability                                    $43

                          Repair Parts Inventory                                               $43

Working

Warranty expense = 9% * 610 = $54.90