Reference no: EM131596949

Problem -

Chloe Co. sold $300,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 5% of the sales price. On June 20, a customer required a $90 part replacement, plus $42 of labor under the warranty.

Provide the journal entry for (a) the estimated warranty expense on January 31 for January sales (b) the June 20 warranty. Refer to the Chart of Accounts for exact wording of account titles

CHART OF ACCOUNTS Chloe Co. General Ledger

ASSETS

• 110Cash
• 111Accounts Receivable
• 112Interest Receivable
• 113Notes Receivable
• 115Merchandise Inventory
• 116Supplies
• 118Prepaid Insurance
• 120Land
• 123Building
• 124Accumulated Depreciation-Building
• 125Office Equipment
• 126Accumulated Depreciation-Office Equipment

LIABILITIES

• 210Accounts Payable
• 213Interest Payable
• 214Notes Payable
• 215Wages Payable
• 216Social Security Tax Payable
• 217Medicare Tax Payable
• 218Employees Federal Income Tax Payable
• 219Employees State Income Tax Payable
• 221Retirement Savings Deductions Payable
• 224Federal Unemployment Tax Payable
• 225State Unemployment Tax Payable
• 226Vacation Pay Payable
• 227Unfunded Pension Liability
• 228Product Warranty Payable

EQUITY

• 310Owner, Capital
• 311Owner, Drawing3
• 12Income Summary

REVENUE

• 410Sales
• 610Interest Revenue

EXPENSES

• 510Cost of Merchandise Sold
• 520Wages Expense
• 524Depreciation Expense-Building
• 525Delivery Expense
• 526Repairs Expense
• 529Selling Expenses
• 531Rent Expense
• 532Depreciation Expense-Office Equipment
• 533Insurance Expense
• 534Supplies Expense
• 535Payroll Tax Expense
• 536Vacation Pay Expense
• 537Pension Expense
• 538Cash Short and Over
• 539Product Warranty Expense
• 540Miscellaneous Expense
• 710Interest Expense