ACC 306 Week 1 E13 22
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Description
ACC 306 Week 1 E13-22
E1322 - Woodmier Lawn Products - Warranty expense; change in estimate ? LO5 LO6
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2010 that carry a one-year warranty against manufacturers defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 2% of sales. Sales of the sprinklers in 2010 were $2.5 million. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product:
Accrued liability and expense
Warranty expense (2% $2,500,000) ...........................50,000.................................
Estimated warranty liability .............................................................50,000........
Actual expenditures (summary entry)
Estimated warranty liability ............................................23,000..........................
Cash, wages payable, parts and supplies, etc. ...................................23,000
In late 2011, the companys claims experience was evaluated and it was determined that claims were far more than expected3% of sales rather than 2%.
Required:
- Assuming sales of the sprinklers in 2011 were $3.6 million and warranty expenditures in 2011 totaled $88,000, prepare any journal entries related to the warranty.
2.Assuming sales of the sprinklers were discontinued after 2010, prepare any journal entry(s) in 2011 related to the warranty.