Estimated warranty liability
1. Obj. 5
EarlKeen Co. sold $260,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 4% of the sales price. On August 15, a customer required a $100 part replacement plus $50 of labor under the warranty.
Provide the journal entry for (a) the estimated warranty expense on January 31 for January sales and (b) the August 15 warranty work.
PE 11-7B
Estimated warranty liability
1. Obj. 5
Quantas Industries sold $325,000 of consumer electronics during July under a nine-month warranty. The cost to repair defects under the warranty is estimated at 4.5% of the sales price. On November 11, a customer was given $220 cash under terms of the warranty.
Provide the journal entry for (a) the estimated warranty expense on July 31 for July sales and (b) the November 11 cash payment.