Question

EarlKeen Co. sold $270,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 6% of the sales price. On August 15, a customer required a $115 part replacement plus $46 of labor under the warranty.

Provide the journal entry for (a) the estimated warranty expense on January 31 for January sales on page 10 of the journal and (b) the August 15 warranty work on page 14 of the journal. Refer to the Chart of Accounts for exact wording of account titles.

Journal

Provide the journal entry for (a) the estimated warranty expense on January 31 for January sales on page 10 of the journal and (b) the August 15 warranty work on page 14 of the journal. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10PAGE 14

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Adjusting Entries
2
3

Answer 1

Date	Description	Post ref.	Debit	Credit	Assets	Liabilities	Equity
January 31	Product Warranty expense		16200				↓	=270000*6%
	Product Warranty payable			16200		↑
Date	Description	Post ref.	Debit	Credit	Assets	Liabilities	Equity
August 15	Product Warranty payable		161			↓
	Supplies			115	↓
	Wages payable			46		↑