Level 4: Receivables and payables · Exercise 46 of 72 · Pro

Honoring a warranty claim

A journal entry exercise from Journaldrill. Solve it with an account picker and debit and credit fields in your browser, and it is checked the moment you submit.

The task

In August a customer brings a dishwasher back to Ridgeline Appliances under warranty. Ridgeline replaces a pump with a part from its own inventory that cost $140 and pays an outside technician $95 in cash for the labor. Ridgeline accrues warranty costs when appliances are sold. Record the repair.

What this exercise teaches

Because Ridgeline accrued the expected cost at the time of sale, the actual repair reduces Estimated Warranty Liability by $140 + $95 = $235. Inventory is credited for the part used and Cash for the labor paid. Debiting Warranty Expense again would count the cost twice.

A hint if you get stuck

The expense was recognized when the appliance was sold. The repair uses up the liability that was set aside, not a new expense.