Reference no: EM13481953

Warranty expense. Woodmier Lawn Products introduced a new line of commercial sprinklers in 2008 that carry a one-year warranty against manufacturer's defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 2% of sales. Sales of the sprinklers in 2008 were $2,500,000. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product:

Accrued liability and expense

Warranty expense (2% × $2,500,000) ... 50,000

Estimated warranty liability....................50,000

Actual expenditures (summary entry)

Estimated warranty liability ......... 23,000

Cash, wages payable, parts and supplies, etc .....23,000

In late 2009, the company's claims experience was evaluated and it was determined that claims were more than expected - 3% of sales rather than 2%.

Required:

1. Assuming sales of the sprinklers in 2009 were $3,600,000 and warranty expenditures in 2009 totaled $88,000, prepare any journal entries related to the warranty.

2. Assuming sales of the sprinklers were discontinued after 2008, prepare any journal entry(s) in 2009 related to the warranty.