Question 11.7: Estimated Warranty Liability Cook-Rite Co. sold $140,000 of ...
Estimated Warranty Liability
Cook-Rite Co. sold $140,000 of kitchen appliances during August under a six-month warranty. The cost to repair defects under the warranty is estimated at 6% of the sales price. On September 12, a customer required a $200 part replacement plus $90 of labor under the warranty.
Provide the journal entry for (a) the estimated warranty expense on August 31 for August sales and (b) the September 12 warranty work.
a. Product Warranty Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400
Product Warranty Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400
To record warranty expense for August, 6% × $140,000.
b. Product Warranty Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Wages Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Replaced defective part under warranty.