Question

Ecco Company sold $145,000 of kitchen appliances with six-month warranties during September. The cost to repair defects under the warranty is estimated at 9% of the sales price. On October 15, a customer required a $100 part replacement, plus $86 labor under the warranty. Required: Provide the journal entry for (a) the estimated expense on September 30 and (b) the October 15 warranty work. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS

Ecco Company

General Ledger

	ASSETS
110	Cash
111	Accounts Receivable
112	Interest Receivable
113	Notes Receivable
115	Inventory
116	Supplies
118	Prepaid Insurance
120	Land
123	Building
124	Accumulated Depreciation-Building
125	Office Equipment
126	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
213	Interest Payable
214	Notes Payable
221	Wages Payable
222	Social Security Tax Payable
223	Medicare Tax Payable
224	Federal Withholding Tax Payable
225	State Withholding Tax Payable
226	Federal Unemployment Tax Payable
227	State Unemployment Tax Payable
228	State Disability Insurance
231	Medical Insurance Payable
232	Retirement Savings Deductions Payable
233	Union Dues Payable
234	Vacation Pay Payable
235	Unfunded Pension Liability
241	Product Warranty Payable
242	EPA Fines Payable
243	Litigation Claims Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends

a. Provide the journal entry for the estimated expense on September 30. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

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

b. Provide the journal entry for the October 15 warranty work. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

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

Answer 1

Date	General Journal	Debit	Credit
During September	Product Warranty expense ($145,000 x 9%)	$ 13,050
	Product Warranty payable		$ 13,050
	(To record the Product warranty expense)
October - 15	Product Warranty payable - Bal. Fig.	$186
	Wages payable		$86
	Supplies / Inventory		$100
	(To record warranty payable)