Exercise 13-24 Warranty expense; change in estimate [L013-5, 13-6 Woodmier Lawn

Question

Exercise 13-24 Warranty expense; change in estimate [L013-5, 13-6 Woodmier Lawn Products introduced a new line of commercial sprinklers in 2017 th defects. Because this was the first product for the experience of others in the industry. Based on that experience, warranty costs troduced a new line of commercial sprinklers in 2017 that carry a one-year warranty against manufacturer's which the company offered a warranty, trade publications were consulted to determine were expected to approximate 2% of sales sales of 17 were $3.3 million. Accordingly. the following entries relating to the contingency for warra during the first year of selling the product: General Journa Debit credit Accrued liability and expense Warranty expense (2 3,300, 000) 66, 000 Estimated varranty liability 66,000 Actual expenditures (sunmary entry) Estimated warranty liability 28,000 Cash, vages payable, parts and supplies, etc. 28,000 ar more than expected 3% of In late 2018, the company's claims experience was evaluated and it was determined that clams were sales rather than 2%. Required: 1. Assuming sales of the sprinklers in 2018 were $4 4 miion and warranty expenditures in 2018 totaled $96.000, prepare any journal entries related to the warranty 2. Assuming sales of the sprinklers were discontinued after 2017 prepare any journal entryls) in 2018 reiated to the warranty Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assuming sales of the sprinkiers were discontinued sfter 2017. prepare any journal entryis) in 20:8 related to the

Explanation / Answer

Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Warranty Expense    132,000.00 $4,400,000 X 3%    Estimated Warranty Liability    132,000.00 (To record the warranty expense) 2 Estimated Warranty Liability      96,000.00    Cash      96,000.00 (To record the warranty expenses paid) Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 3 Estimated Warranty Liability      38,000.00 $66,000 - $28,000 Loss on Product Warranty      33,000.00 $3,300,000 X (3% - 2%)    Cash      71,000.00 $3,300,000 X 3% - $28,000 (To record the warranty expenses paid)

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