Question

Accrued Product Warranty

Fosters Manufacturing Co. warrants its products for one year. The estimated product warranty is 5% of sales. Assume that sales were $180,000 for January. On February 7, a customer received warranty repairs requiring $285 of parts and $75 of labor.

a. Journalize the adjusting entry required at January 31, the end of the first month of the current fiscal year, to record the accrued product warranty. If an amount box does not require an entry, leave it blank.

b. Journalize the entry to record the warranty work provided in February. If an amount box does not require an entry, leave it blank.

Answer 1

Event	Date	Accounts Titles and Explanations	Debit (in $)	Credit (in $)
a.	Jan.31	Product Warranty Expense ($ 180,000 x 5% )	$ 9,000
		Product warranty payable		$ 9,000
		(To record the Warranty Expense )
b.	Feb-07	Product warranty payable	$ 360
		Supplies		$ 285
		Wages payable		$ 75
		(To record the Warranty Expense payable )