Question

On December 31, 2020, Crane Company sells production equipment to Larkspur Inc. for $53,700. Crane includes a one-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2020. Crane estimates the prices to be $49,800 for the equipment and $3,900 for the cost of warranty. Are the sale of the equipment and the warranty separate performance obligations within the contract? SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry to record this transaction on December 31, 2020. Ignore any related cost of goods sold entry. (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 o for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

Ans:A). Journal entry

Date	Account title and explanation	Debit($)	Credit($)
Dec 31,2020	Cash or Bank A/c	53,700
	Warranty expense	3,900
	Warranty Liability		3,900
	Equipment A/C		53,700
	(amt received on sale of production equipment)

,B). Journal Entry

Date	Account title and explanation	Debit($)	Credit($)
Dec 31,2020	Cash or bank A/c .	54,470
	Warranty expense	3,900
	Warranty Liability		3,900
	Equipment A/c.		53,700
	Unearned service revenue		770
	(to record with additional 2 year warranty)