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'sclaims experience was evaluated and it was determined that claimswere more than expected - 3% of sales rather than 2%.
Required:
1. Assuming sales of the sprinklers in 2009 were $3,600,000 and warranty expendituresin 2009 totaled $88,000, prepare any journal entries related to the warranty.
2. Assuming sales of thesprinklers were discontinued after 2008, prepare any journalentry(s) in 2009 related to the warranty.