On September 1, Home Store sells a mower (that costs $240) for $540 cash with a one-year warranty that covers parts. Warranty expense is estimated at 6% of sales and is recorded at the time of the sale. On January 24 of the following year, the mower is brought in for repairs covered under the warranty requiring $38 in materials taken from the Repair Parts Inventory. Prepare the September 1 entry to record the mower sale (and cost of sale) and the January 24 entry to record the warranty repairs.

Question

Business

Colby Jordan

22 January, 12:58

On September 1, Home Store sells a mower (that costs $240) for $540 cash with a one-year warranty that covers parts. Warranty expense is estimated at 6% of sales and is recorded at the time of the sale. On January 24 of the following year, the mower is brought in for repairs covered under the warranty requiring $38 in materials taken from the Repair Parts Inventory. Prepare the September 1 entry to record the mower sale (and cost of sale) and the January 24 entry to record the warranty repairs.

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Quincy · Answer 1

J1

Cash $540 (debit)

Cost of Goods Sold $240 (debit)

Sales Revenue $540 (debit)

Inventory $240 (credit)

J2

Warranty Provision $38 (debit)

Direct Materials $38 (credit)

Explanation:

September 1 entries to record the cost and sale of the mower are:

Cash $540 (debit)

Cost of Goods Sold $240 (debit)

Sales Revenue $540 (debit)

Inventory $240 (credit)

The Warranty Expenses is recorded as:

Warranty Expense $32.40 (debit)

Warranty Provision $32.40 (credit)

Warranty = $540 * 6% = $32.40

When the mower is brought i for repairs, the amount of Provision is used as follows:

Warranty Provision $38 (debit)

Direct Materials $38 (credit)