Question

EarlKeen Co. sold $270,000 of equipment during January under a one-year warranty. The cost to repair...

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
Business   Accounting   
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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 ↑
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