Warranty Transactions for 2020: Prepare Your Journal Entries

Do you know how to record warranty transactions for the year 2020?

Are you familiar with the process of preparing journal entries to record warranty transactions related to appliances?

Journal Entries to Record Warranty Transactions for 2020

Here are the journal entries to record the warranty transactions for the year 2020:

1) Record the estimated cost related to 3-month warranties:

Debit: Warranty Expense - $39,600

Credit: Warranty Liability - $39,600

2) Record the cost incurred related to 3-month warranties:

Debit: Warranty Liability - $25,700

Credit: Inventory (replacement appliances) - $18,000

Credit: Inventory (parts) - $7,700

3) Record the sale of 1-year extended warranties:

Debit: Cash - $1,120

Credit: Unearned Warranty Revenue - $1,120

4) Record the cost incurred related to 1-year extended warranties:

Debit: Warranty Expense - $15,200

Credit: Warranty Liability - $15,200

5) Record the service revenue:

Debit: Unearned Warranty Revenue - $1,120

Credit: Warranty Service Revenue - $1,120

These journal entries will help you accurately document warranty transactions for the year 2020. Understanding how to record these transactions is essential for maintaining financial records.