EX 11-19 Accrued product warranty

Lowe Manufacturing Co. warrants its products for one year. The estimated product warranty is 4% of sales. Assume that sales were $560,000 for June. In July, a customer received warranty repairs requiring $140 of parts and $95 of labor.

a. Journalize the adjusting entry required at June 30, the end of the first month of the current fiscal year, to record the accrued product warranty.

b. Journalize the entry to record the warranty work provided in July.


Answer:

a.
 Product Warranty Expense 22,400
Product Warranty Payable 22,400
To record warranty expense for June,
4% × $560,000.
Product Warranty Payable 235
Supplies 140
Wages Payable 95