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  • Mar 14, 2010, 11:57 PM
    calvin85sg
    Warranty expense & warranty liability
    I need help with the following question. Any pointers is greatly appreciated.

    Warranty expense. Woodmier Lawn Products introduced a new line of
    Commercial sprinklers in 2002 that carry a one-year warranty against
    Manufacturer’s defects. Because this was the first product for which the
    Company offered a warranty, trade publications were consulted to determine the
    Experience of others in the industry. Based on that experience, warranty costs
    Were expected to approximate 2% of sales. Sales of the sprinklers in 2002 were
    $2,500,000. Accordingly, the following entries relating to the contingency for
    Warranty costs were recorded during the first year of selling the product:

    Accrued liability and expense

    Dr Warranty expense (2% × $2,500,000)... 50,000
    Cr Estimated warranty liability... ………... 50,000

    Actual expenditures (summary entry)

    Dr Estimated warranty liability ……… 23,000
    Cr Cash, wages payable, parts and supplies, etc... 23,000

    In late 2003, the company’s claims experience was evaluated and it was determined that claims were more than expected –3% of sales rather than 2%.

    Required:

    1. Assuming sales of the sprinklers in 2003 were $3,600,000 and warranty expenditures
    In 2009 totaled $88,000, prepare any journal entries related to the warranty.

    2. Assuming sales of the sprinklers were discontinued after 2008, prepare any journal entry(s) in 2009 related to the warranty.
  • Mar 15, 2010, 12:01 AM
    calvin85sg

    Please note that the dates should be 2008 for the 1st paragraph

    "Woodmier Lawn Products introduced a new line of
    Commercial sprinklers in 2008 that carry a one-year warranty against manufacturer’s defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 2% of sales. Sales of the sprinklers in 2008 were $2,500,000. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product:"
  • Mar 15, 2010, 12:36 PM
    morgaine300

    #1, using 3% instead of 2%, figure out what that number should be, and then the entries are exactly the same as how they already did it in the given information.

    #2, not sure what's going on cause you're changing dates around and they don't match w/in the problem. You also need to get #1 done first anyway.

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