Brief Exercise 13-13
Headland Factory provides a 2-year warranty with one of its products which was first sold in 2017. Headland sold $932,500 of products subject to the warranty. Headland expects $137,130 of warranty costs over the next 2 years. In that year, Headland spent $66,530 servicing warranty claims. Prepare Headland’s journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs.
During 2017 (1 debit, 1 credit): *Answer is NOT debit cash, credit sales revenue*
2017 (1 debit, 1 credit): *Answer is NOT debit warranty expense, credit warranty liability*
12/31/17 (1 debit 1 credt): Answer is NOT debit warranty liability, credit inventory*