Woodmier Lawn Products introduced a new line of commercial sprinklers in 2023 that carry a one-year warranty against manufacturer's 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 2023 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: Debit Credit General Journal Accrued liability and expense Warranty expense (2% * $2,500,000) 50,000 Warranty liability Actual expenditures (summary entry) Warranty liability Cash 23,000 In late 2024, the company's claims experience was evaluated and it was determined that claims were far more than expected-3% of sales rather than 2%. 50,000 23,000 Required: 1. Assuming sales of the sprinklers in 2024 were $3.6 million and warranty expenditures in 2024 totaled $88,000, prepare any journal entries related to the warranty. 2. Assuming sales of the sprinklers were discontinued after 2023, prepare any journal entry(s) in 2024 related to the warranty.

Woodmier Lawn Products introduced a new line of commercial sprinklers in 2023 that carry a one-year warranty against manufacturer's 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 2023 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: Debit Credit General Journal Accrued liability and expense Warranty expense (2% * $2,500,000) 50,000 Warranty liability Actual expenditures (summary entry) Warranty liability Cash 23,000 In late 2024, the company's claims experience was evaluated and it was determined that claims were far more than expected-3% of sales rather than 2%. 50,000 23,000 Required: 1. Assuming sales of the sprinklers in 2024 were $3.6 million and warranty expenditures in 2024 totaled $88,000, prepare any journal entries related to the warranty. 2. Assuming sales of the sprinklers were discontinued after 2023, prepare any journal entry(s) in 2024 related to the warranty.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Woodmier Lawn Products introduced a new line of commercial sprinklers in 2023 that carry a one-year warranty against manufacturer's 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 2023 were $2.8 million. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product: General Journal Accrued liability and expense Warranty expense (2% × $2,800,000) Warranty liability Actual expenditures (summary entry) Warranty liability Cash Debit 56,000 Required 1 Required 2 25,000 Credit 56,000 In late 2024, the company's claims experience was evaluated and it was determined that claims were far more than expected-3% of sales rather than 2%. View transaction list 25,000 Required: 1. Assuming…
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