Warranty Transactions for 2020: Prepare Your Journal Entries
Do you know how to record warranty transactions for the year 2020?
Are you familiar with the process of preparing journal entries to record warranty transactions related to appliances?
Journal Entries to Record Warranty Transactions for 2020
Here are the journal entries to record the warranty transactions for the year 2020:
1) Record the estimated cost related to 3-month warranties:
Debit: Warranty Expense - $39,600
Credit: Warranty Liability - $39,600
2) Record the cost incurred related to 3-month warranties:
Debit: Warranty Liability - $25,700
Credit: Inventory (replacement appliances) - $18,000
Credit: Inventory (parts) - $7,700
3) Record the sale of 1-year extended warranties:
Debit: Cash - $1,120
Credit: Unearned Warranty Revenue - $1,120
4) Record the cost incurred related to 1-year extended warranties:
Debit: Warranty Expense - $15,200
Credit: Warranty Liability - $15,200
5) Record the service revenue:
Debit: Unearned Warranty Revenue - $1,120
Credit: Warranty Service Revenue - $1,120
These journal entries will help you accurately document warranty transactions for the year 2020. Understanding how to record these transactions is essential for maintaining financial records.