Question

On September 11, 2016, Home Store sells a mower (that costs \(200) for \)500 cash with a one-year warrantythat covers parts. Warranty expense is estimated at 8% of sales. On July 24, 2017, the mower is brought in forrepairs covered under the warranty requiring $35 in materials taken from the Repair Parts Inventory. Prepare theSeptember 11, 2016, entry to record the mower sale (and cost of sale), and the July 24, 2017, entry to recordthe warranty repairs.

Short answer

The cash account is debited with $500, and the sales account is credited with $500.

Step-by-step solution

Definition of warranty

Warranty can be defined as theseller's obligationsthat arise if the already sold product is not performing up to the mark, and then the seller is obliged to replace or correct that product.

Journal entries        

Date	Particulars	Debit ($)	Credit ($)
Sep. 11, 2016	Cash	500
	Sales Revenue		500
	(To record the sale of the mower)
Sep. 11, 2016	Cost of Goods Sold	200
	Merchandise inventory		200
	(To record the cost of goods sold)
Sep. 11, 2016	Warranty Expense	40
	Estimated Warranty Liability		40
	(To record the estimate of warranty liability)
July 24, 2017	Estimated Warranty Liability	35
	Repairs Part Inventory		35
	(To record the warranty repairs)