Ecco Company sold $151,000 of kitchen appliances with six-month warranties during September. The cost to repair defects under the warranty is estimated at 9% of the sales price. On October 15, a customer required a $120 part replacement, plus $87 labor under the warranty.

Provide the journal entry (a) the estimated expense on September 30 and (b) the October 15 warranty work.

The appropriate journal entry to record the estimated expense on September 30 and the October 15 warranty work are:

a. Ecco Company journal entry

September 30

Debit Warranty expense $13,590            

($151,000 × 9%)

Credit Warranty payable $13,590    

(To record estimated expense)

b. September 30

Debit Warranty payable   $207

($120+$87)

Credit Supplies  $120

Credit Wages payable $87

(To record warranty work)

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The journal entries are shown below

Explanation:

The journal entries are as follows

a. Product warranty expense $13,590             ($151,000 × 9%)

        To Product warranty payable$13,590    

(Being the warranty estimated expense is recorded)

b. Product warranty payable   $207

                To Supplies  $120

                 To Wages payable $87

(Being the warranty work is recorded)

Only these two entries are passed

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

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