Cook-Rite Co. sold $173,000 of equipment during January under a two-year warranty. The cost to repair defects under the warranty is estimated at 6% of the sales price. On August 15, a customer required a $230 part replacement, plus $167 of labor under the warranty. Required: (a) Provide the journal entry for the estimated warranty expense on January 31 for January sales. Jan. 31 (b) Provide the journal entry for the August 15 warranty work. If an amount box does not require an entry, leave it blank. Aug. 15

Answer and Explanation:

The journal entries are shown below:

a. On Jan 31

Warranty expense Dr ($173,000 × 6%) $10,380

       To Product Warranty payable $10,380

(Being the warranty expense is recorded)

For recording this we debited the warranty expense as it increased the expenses and credited the product warranty payable as it also increased the liabilities

b. On Aug 15

Product Warranty payable $397

             To Supplies $230

             To wages payable $167

(Being the product warranty payable is recorded)

For recording this we debited the product warranty payable as it decreased the liabilities and the supplies and wages payable is credited as it decreased the assets and increased the liabilities

answer; coefficient of correlation;