Problem 137 Whispering Company sells a machine for 7140 with

Problem 13-7 Whispering Company sells a machine for $7,140 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the company sells 440 machines in 2017 (warranty expense is incurred half in 2017 and half in 2018). As a result of product testing, the company estimates that the warranty cost is $310 per machine ($132 parts and $178 labor). Use \"Inventory\" account to record the warranty expense Assuming that actual warranty costs are incurred exactly as estimated, what journal entries would be made relative to the following facts? Sale of machinery and warranty expense incurred in 2017. (If no entry is required, select \"No Entry\" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually Account Titles and Explanation Debit Credit (To record sale) (To record warranty expense) Warranty accrual on December 31, 2017. (If no entry is required, select \"No Entry\" for the account tities and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Solution

Whispering Company General,Journal Account Title and explaination Amt (Dr) Amt (Cr) Cash(440*$7140) $                31,41,600.00    To Sales Revenue $ 31,41,600.00 (Being amount of sales of 440 machines @ $7140) Warranty Expenses $                      68,200.00    To Inventory(440*1/2*$132) $       29,040.00    To Salaries & Wages Payable(440*1/2*$178) $       39,160.00 (being amount of Warranty Expenses incurred in 2017) No Entry for Warrant Accrual in 2017 Warranty Expenses $                      68,200.00    To Inventory(440*1/2*$132) $       29,040.00    To Salaries & Wages Payable(440*1/2*$178) $       39,160.00 (being amount of Warranty Expenses incurred in 2018) Partial Balance sheet Current Liabilities Warranty Liability $                      68,200.00