[chrissytaylor]

A company sells computers with a 6-month warranty. In January, the company sold 100,000 computers at $1,750 each, and 1,500 computers were turned in for repairs during the same month. The total repairs amounted to $185,000 costs from the computer parts inventory. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. What would be the journal enteries for the estimated warranty expense for January and warranty repair costs for January?

[Gator1087]

A company sells computers with a 6-month warranty. In January, the company sold 100,000 computers at $1,750 each, and 1,500 computers were turned in for repairs during the same month. The total repairs amounted to $185,000 costs from the computer parts inventory. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. What would be the journal enteries for the estimated warranty expense for January and warranty repair costs for January?

Assuming you're using the accrual method:
.02*100,000*200=400,000
400,000-185,000=215,000

Warranty expense dr 185,000
Inventory-parts cr 185,000
Warranty expense dr 215,000
Estimated liability under warranties cr 215,000