Question

On January 2, 2020, Carla Company sells production equipment to Fargo Inc. for $48,000. Carla 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, Carla incurs costs related to warranties of $930. At December 31, 2020, Carla estimates that $610 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 for the amounts.) Date Account Titles and Explanation Debit Credit e Textbook and Media List of Accounts Repeat the requirements for (a), assuming that in addition to the assurance warranty, Carla sold an extended warranty (service-type warranty) for an additional 2 years (2022-2023) for $840. (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.) Date Account Titles and Explanation Debit Credit

Answer 1

Journal entries

1.

Date	General journal	Debit	Credit
Jan 2,2020	cash	$48,000
	Sales revenue		$48,000
During 2020	Warranty expense	$930
	Parts expenses		$930
Dec 31,2020	Warranty expense	$610
	Warranty Liability		$610

2.

Date	General journal	Debit	Credit
Jan 2,2020	Cash	$48,840
	Sales revenue		$48,000
	To unearned warranty revenue		$840
During 2020	Warranty expenses	$930
	Parts expenses		$930
Dec 31,2020	Warranty expenses	$610
	Warranty liabilities		$610

____×____

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