Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product:
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2017 that carry a one-year warranty against manufacturer’s defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 3% of sales. Sales of the sprinklers in 2017 were $3,000,000. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product:
| Accrued liability and expense | ||
| Warranty expense (3% × $3,000,000) | 90,000 | |
| Estimated warranty liability | 90,000 | |
| Actual expenditures (summary entry) | ||
| Estimated warranty liability | 41,400 | |
| Cash, wages payable, parts and supplies, etc. | 41,400 | |
In late 2018, the company's claims experience was evaluated and it was determined that claims were far more than expected—4% of sales rather than 3%.
Required:
1. Assuming sales of the sprinklers in 2018 were $4,100,000 and warranty expenditures in 2018 totaled $103,000, prepare any
2. Assuming sales of the sprinklers were discontinued after 2017, prepare any journal entries in 2018 related to the warranty.
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