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This post addresses the journal entries for warranty expense

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Company sold 600 gadgets during 2012 for $4,000 each. Total cost of servicing the the warranties will be $150,000 for 2 years. Prepare all journal entries to record including sales.

If Co had used the cash basis how much warranty expense would have been recorded in 2012?

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Solution Summary

The solution provides all journal entries needed for the warranties and also shows how the company would have recorded the expense if they had used the cash basis.

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1st journal entry:

Sales 2,400,000 (CR)
Accounts receivable 2,400,000 (DR)

To record sales.

2nd journal entry:

Liabilities under warranties, Year 1 75,000 ...

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