[aznboyknowledge]

Woodmier Lawn Products introduced a new line of commercial sprinklers in 2012 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 2012 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
Warranty expense (2% × $2,500,000) 50,000
Estimated warranty liability 50,000

Actual expenditures (summary entry)
Estimated warranty liability 23,000
Cash, wages payable, parts and supplies, etc. 23,000


In late 2013, the company's claims experience was evaluated and it was determined that claims were far more than expected—3% of sales rather than 2%.

1. Assuming sales of the sprinklers in 2013 were $3,600,000 and warranty expenditures in 2013 totaled $88,000, prepare any journal entries related to the warranty.


2. Assuming sales of the sprinklers were discontinued after 2012, prepare any journal entry(s) in 2013 related to the warranty.

[smoothy]

If you read the sticky on homework assignments... you would see you have to give us your answers and work before we can assist you. We don't do the homework for you.

[aznboyknowledge]

My answers are the following.

I am confident that I got part 1 right but not so sure about part 2.

1. Debit Warranty Liability 88,000
Credit Cash, Wages payable, parts and supplies, etc. 88,000

2. Debit Warranty Liability 22,000
Credit Cash, Wages payable, parts and supplies, etc. 22,000

My logic to part 2 is that given that the company estimates 50,000 of warranty expense for 2012 and 23,000 is already expensed therefore the remaining 22,000 need to be expensed since it was discontinued after 2012.

May someone please correct my journal entry or thought process by telling me where I went wrong?

Thank You