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Logan Manufacturing Co$.$ warrants its products for one year. The estimated product warranty is $4\%$ of sales. Assume that sales were $$700,000$ for January. In February, a customer received warranty repairs requiring $$210$ of parts and $$65$ of labor.

Required:

a$.$ Journalize the adjusting entry required at January $31,$ the end of the first month of the current fiscal year, to record the accrued product warranty.$*$

b$.$ On February $28,$ journalize the entry to record the warranty work provided in February.$*$

$*$Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. CHART OF ACCOUNTS

Logan Manufacturing Co$.$

General Ledger

ASSETS

$110$ Cash

$111$ Accounts Receivable

$112$ Interest Receivable

$113$ Notes Receivable

$115$ Merchandise Inventory

$116$ Supplies

$118$ Prepaid Insurance

$120$ Land

$123$ Building

$124$ Accumulated Depreciation$-$Building

$125$ Office Equipment

$126$ Accumulated Depreciation$-$Office Equipment

LIABILITIES

$210$ Accounts Payable

$213$ Interest Payable

$214$ Notes Payable

$215$ Wages Payable

$216$ Social Security Tax Payable

$217$ Medicare Tax Payable

$218$ Employees Federal Income Tax Payable

$219$ Employees State Income Tax Payable

$221$ Retirement Savings Deductions Payable

$224$ Federal Unemployment Tax Payable

$225$ State Unemployment Tax Payable

$226$ Vacation Pay Payable

$227$ Unfunded Pension Liability

$228$ Product Warranty Payable

EQUITY

$310$ Owner, Capital

$311$ Owner, Drawing

REVENUE

$410$ Sales

$610$ Interest Revenue

EXPENSES

$510$ Cost of Merchandise Sold

$520$ Wages Expense

$524$ Depreciation Expense$-$Building

$525$ Delivery Expense

$526$ Repairs Expense

$529$ Selling Expenses

$531$ Rent Expense

$532$ Depreciation Expense$-$Office Equipment

$533$ Insurance Expense

$534$ Supplies Expense

$535$ Payroll Tax Expense

$536$ Vacation Pay Expense

$537$ Pension Expense

$538$ Cash Short and Over

$539$ Product Warranty Expense

$540$ Miscellaneous Expense

$710$ Interest Expense Scroll down to access page $2$ of the journal.

a$.$ Journalize the adjusting entry required at January $31,$ the end of the first month of the current fiscal year, to record the accrued product warranty. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

How does grading work?

PAGE $1$

JOURNALACCOUNTING EQUATION

Score: $21/25$

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

$1$

Adjusting Entries

Jan. $31$

Product Warranty Expense

$11,820\mathrm{.}00$

$$

Product Warranty Payable

$11,820\mathrm{.}00$

$$

Points:

$4\mathrm{.}2/5$

b$.$ On February $28,$ journalize the entry to record the warranty work provided in February. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

How does grading work?

PAGE $2$

JOURNALACCOUNTING EQUATION

Score: $28/37$

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

Jan. $31$

Product Warranty Payable

$205\mathrm{.}00$

$$

Wages Payable

$65\mathrm{.}00$

$$

Supplies

Points:

$5\mathrm{.}3/7$

Check My Work

a$.$ The accrued product warranty amount is recorded in the same period in which the sale is recorded, therefore following the matching concept.

b$.$ Consider what resources the company will have to use in order to satisfy the warranty.

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