Question

Whispering Corporation sells computers under a 2 year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2017, the corporation solls for cash 372 computers at a unit price of $2,300. On the basis of past experience, the 2 year warranty costs are estimated to be $102 for parts and $192 for labor per unit. (For simplicity, assume that all sales occurred on December 31, 2017.) The warranty is not sold separately from the computer Record any necessary Journal entries in 2017. (If no entry is required, select "No Entry for the account tities and enter automatically indented when the amount is entered. Do not indent manually.) for the amounts, Credit account titles are Account Titles and Explanation What liability relative to these transactions would appear on the December 31, 2017, balance sheet and how would it be classified? Whispering Corporation Balance Sheet (Partial) December 31, 2017 1 1 :22 AM

Answer 1

Answer-a-Journal Entries in 2017:-

Transaction	Account Title and Explanation	Debit ($)	Credit ($)
a.	Cash (372*$2,300)	855,600
	Sales Revenue		855,600
	(To record sales of computers)
b.	Warranty Expenses (372*($162+$192)	131,688
	Warranty Payable		131,688
	(To record warranty expenses)

b- WHISEPRING CORPORATION

Balance Sheet (Partial)

December 31,2017

Current Liability:
Warranty Payable ($131,688/2)	$65,844
Long-Term Liabilities:-
Warranty Payable ($131,688/2)	$65,844

Note:As warranty is for 2 years, the warranty payable to the next 12 months will be shown as current liability while the remaining liability will be shown as long term liability.

c-Journal entry in 2018:-

Transaction	Account Title and Explanation	Debit ($)	Credit ($)
	Warranty payable ($22,860+$36,010)	58,870
	Inventory		22,860
	Wages Payable		36,010
	(To record warranty cost incurred)

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