Asked by Oscar Cerna on Jun 27, 2024
Verified
Hadley Industries warrants its products for one year. The estimated product warranty expense is 4% of sales. Assume that sales were $210,000 for June. In July, a customer received warranty repairs requiring $205 of parts and $75 of labor.(a)Journalize the adjusting entry required at June 30, the end of the first month of the current year, to record the estimated product warranty expense.(b)Journalize the entry to record the warranty work provided in July.
Product Warranty
A product warranty is a promise made by a seller to a buyer to repair or replace a product within a specified period if it fails to meet the terms of the warranty.
Warranty Repairs
Services provided to fix defects in goods sold within a specified period, at no cost to the customer, under the terms of a warranty agreement.
Adjusting Entry
An accounting entry made at the end of an accounting period to allocate income and expenditure to the correct period.
- Calculate, journalize, and understand product warranty liabilities and their impact on financial statements.
Verified Answer
8,400
Product Warranty Payable
8,400
To record warranty expense for June,
4% × $210,000.(b)Product Warranty Payable
280
Supplies
205
Wages Payable
75
Learning Objectives
- Calculate, journalize, and understand product warranty liabilities and their impact on financial statements.
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