Chapter 4
Current Liabilities
173
AP-12A (
8
)
After recording an estimated warranty liability on the sale of a lawnmower, Lee-Yau is required
to repair the lawnmower sold (there is a faulty wire) and Lee-Yau spends $500 in cash on
October 15, 2017 remedying the problem. Record the journal entry for this transaction.
Date
Account Title and Explanation
Debit
Credit
AP-13A (
8
)
Shining Star Corporation produces and sells washing machines, and provides customers with
a one-year warranty on all its products. It is estimated that the company incurs approximately
$50 of warranty expense on each machine sold. During 2016, the company sold 400 washing
machines. All warranty transactions are recorded on December 31.
Required
a
)
Prepare a journal entry to record the estimated warranty liability.
Date
Account Title and Explanation
Debit
Credit
b) During 2017, the company used $5,000 worth of inventory parts and paid $10,000 for
maintenance staff salaries. Prepare a journal entry to record this transaction.
Date
Account Title and Explanation
Debit
Credit
