1.
11.5
Accrued Product Warranty
Lowe Manufacturing Co. warrants its products for one year. The estimated product warranty is
4% of sales. Assume that sales were $560,000 for June. In July, a customer received warranty
repairs requiring $140 of parts and $95 of labor.
For a compound transaction, if an amount box does not require an entry, leave it blank.
a. Journalize the adjusting entry required at June 30, the end of the first month of the current
fiscal year, to record the accrued product warranty.
b. Journalize the entry to record the warranty work provided in July.
Solution
Product Warranty Expense (4% × $560,000)
Product Warranty Payable
(To record warranty expense for June)
Product Warranty Payable
Supplies
Wages Payable
a.
Product Warranty Expense (4% × $560,000) $22,400.00
Product Warranty Payable $22,400.00
(To record warranty expense for June)
b. Journalize the entry to record the warranty work provided in July.

2.
Product Warranty Payable $235.00
Supplies $140.00
Wages Payable $95.00
(To record the warranty work provided in July)