Question

On January 2, 2020, Blue Company sells production equipment to Fargo Inc. for $54,000. Blue includes a 2-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on January 2, 2020. During 2020, Blue incurs costs related to warranties of $930. At December 31, 2020, Blue estimates that $680 of warranty costs will be incurred in the second year of the warranty.

Prepare the journal entry to record this transaction on January 2, 2020, and on December 31, 2020 (assuming financial statements are prepared on December 31, 2020). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Repeat the requirements for (a), assuming that in addition to the assurance warranty, Blue sold an extended warranty (service-type warranty) for an additional 2 years (2022–2023) for $820. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

I credit 1$54000 $ 930 1680 Answer: á Date I particulars Debit Jana Cash Alc dr $54,000 2020 | To sales revenue During warranty expense . Ale dr $930 2020 1. To part expense account Dec 31 Warrouy expense Ale ar $ 680 2020 | to warnany liability 16) Date I particulars Debit Jour 2 cash Ale do $54,820 goeo To sales revenue To unearned service Revenuelwarrany) During Warrany expense Al do $930 to part expense account bec31 Karanty expense Ale dr $680 2020 - to warranty liability I credit $ 54000 $ 820 2070 $930 $680