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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Accrued product warranty

Parker Manufacturing Co. warrants its products for one year. The estimated product warranty is 2.5% of sales. Assume that sales were $600,000 for January. In February, a customer received warranty repairs requiring $200 of parts and $110 of labor.

  1. a. Journalize the adjusting entry required at January 31, the end of the first month of the current fiscal year, to record the accrued product warranty.
  2. b. Journalize the entry to record the warranty work provided in February.

To determine

Warranty: It is an agreement made by the company to provide guarantee against the defects in the products.

To Journalize: Adjusting entry to record estimated warranty expense at January 31.

Explanation

Working note:

Calculate the amount of warranty expense as below:

Warranty expense = Sales × Percent(%)=$600,000×2

B.

To determine

To Journalize: Warranty work provided in February.

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