Journey Pty Ltd sells high end professional cameras that comes with a warranty of 2 years...
Journey Pty Ltd sells high end professional cameras that comes
with a warranty of 2 years The estimated product warranty is 2.5%
of sales. Sales for the financial year ending 31 December 2019 were
$550,000 (GST inclusive). On 25 January 2020, a customer received
warranty repairs which cost $8,800 worth of parts and labour.
Required:
a. Provide the adjusting entry required at 31 December 2019 to
record the provisions for warranty. (2 marks)
b. Provide the entry to record the warranty work on 25 January
2020. (2 marks)
Homework Answers
In the books of Journey Pty Ltd. :
| Transaction | Date | Account Titles | Debit | Credit |
| $ | $ | |||
| a. | 31 December 2019 | Warranty Expense ( $ 550,000 x 2.5 % ) | 13,750 | |
| Estimated Warranty Liability | 13,750 | |||
| To record warranty provision | ||||
| b. | 25 January 2020 | Estimated Warranty Liability | 8,800 | |
| Cash | 8,800 | |||
| To record actual warranty expense |
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