Question

P3. Hawk, Inc. sold 10 heavy production machines with 2-year warranties for $250,000 each in 2017. It was estimated that the total warranty costs be $100,000 for the machines sold in 2017. Actual warranty costs incurred were

2017                2018                2019

$40,000           $35,000           $30,000

Instructions: Prepare any necessary journal entries for

1) The estimated total warranty costs on 12/31/2017,

2) The actual warranty costs incurred in 2017, 2018, and 2019.

Answer 1

Date	Account Title and explanation	Debit	Credit
Dec 31, 2017	Warranty Expenses	$ 100,000
	To Estimated Warranty Liabilites		$ 100,000
	(To Record the warranty Expenses of the year)
Dec 31, 2017	Estimated Warranty Liabilites	$ 40,000
	To Spare Parts Inventory		$ 40,000
	(To Record the consumption of warranty Parts )
Dec 31, 2018	Estimated Warranty Liabilites	$ 35,000
	To Spare Parts Inventory		$ 35,000
	(To Record the consumption of warranty Parts )
Dec 31, 2019	Estimated Warranty Liabilites	$ 30,000
	To Spare Parts Inventory		$ 30,000
	(To Record the consumption of warranty Parts )