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a company provides three year warranty with their products. they expect to replace one of every...

a company provides three year warranty with their products. they expect to replace one of every ten products sold under this warranty.

in 2018, they sold 1,000 products for $500 and they spend 13,200 on replacing the "damaged" products. the cost to replace a product is 400 (COGS) .

prepare all journal entries during 2018 for the sale and related warranty expense (assume that 2018 was the first year that the products were sold)

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Answer #1

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Solution: Naming convention is not available, can be slightly different: Journal Entries Event Account title and explaination 1) Debit Credit Cash Sales Revenue To record the sales revenue) Warranty Expense Inventory (or Various accounts) (To record the replacement cost) Warranty Expense Warranty Payable (or Liability) To record the warranty liability at the end of period) (1000*500) 500000 500000 2) $ 13,200 $13,200 3) (100 400)-(13200) $ 26,800 $26,800

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