Pyott co. sells small appliances and offers warranties on all new sales. during the month of december, pyott's sales were $30,000 and accrued related warranties totaled $300. during january, a customer made a repair claim under the warranty requiring $200 of labor. the journal entry related to the january repair would include a debit to the account in the amount of also estimated warranty liability.

Warranty liability account in the amount of $200.

Explanation:

The estimated warranty as it relates to a particular month are debited to the income statement and a corresponding credit entry is made to the liability accounts even though no claim has been made nor payment.

However when the claims are made and payment is to be effected, the bank account is credited and the liability is debited to reduce the liability.

If the warranty claim is higher in the long run than the estimation made the income accounts is further debited with the increment and if it's lower the income account is credited with the amount.

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