Estimated Warranty Liability Savory Co. sold $434,000 of equipment during January under a two-year warranty. The cost to repair defects under the warranty is estimated at 7% of the sales price. On August 15, a customer required a $300 part replacement, plus $245 of labor under the warranty. Required:
(a) Provide the journal entry for the estimated warranty expense on January 31 for January sales. Jan. 31 Cash Accounts Payable Feedback Contingent liability entries are needed when the amount can be reasonably estimated and the liability is probable. Recorded contingent liabilities follow the matching concept. Contingent liabilities are an accrued expense adjusting entry.
(b) Provide the journal entry for the August 15 warranty work. If an amount box does not require an entry, leave it blank. Aug. 15 Product Warranty Expense Product Warranty Expense Product Warranty Expense