Question

The company computers that carry a - year warranty from the manufacturer. At the time of...

The company computers that carry a - year warranty from the manufacturer. At the time of the sale customers are offered the opportunity to also buy a 3 extended warranty for an additional charge . The journal entry recorded ( for extended warranty ) after two years would include? Explain
0 0
Add a comment Improve this question Transcribed image text
Answer #1

Extended warranty additional charges are unearned warranty fees by the firm. They are accounted as part of unearned revenue. They are recognised as revenue in the period in which they are earned.

Journal entry after two years would be

Dr Unearned Warranty Fees

Cr Extended Warranty Fees (Revenue)

As per revenue recognition concept the unearned revenue should be recognised as revenue in the period when the performance obligation is met. Hence at end of the year 2 the warranty fees for year 2 would be recognised as revenue in the books of account

Add a comment
Know the answer?
Add Answer to:
The company computers that carry a - year warranty from the manufacturer. At the time of...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Macrosoft Company sells a line of computers that carry a basic manufacturer’s warranty. In addition, customers...

    Macrosoft Company sells a line of computers that carry a basic manufacturer’s warranty. In addition, customers are offered the opportunity to buy a two-year service-type (extended) warranty for an additional charge. The extended warranty period begins on the date of the product sale. In 2021: (1) Macrosoft sold $320,000 of these extended warranties (all on credit, all on January 1 [silly assumption, I know, but I’m trying to make the accounting easier in this problem]), and (2) actual expenditures under...

  • Carnes Electronics sells consumer electronics that carry a 90-day manufacturer’s warranty. At the time of purchase,...

    Carnes Electronics sells consumer electronics that carry a 90-day manufacturer’s warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $422,000 for these extended warranties (approximately evenly throughout the year).    1.). Prepare journal entries that summarize sales of the extended warranties (assume all credit sales) and any aspects of the warranty that should be recorded during the year. Prepare journal entries that...

  • Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase,...

    Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $412,000 for these extended warranties (approximately evenly throughout the year) Required 1-a. Does this situation represent a provision? Yes No 1-b. How should it be accounted for? Revenue is deferred as a liability sale, and recognized on straight-line basis at the time of...

  • Cames Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase,...

    Cames Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $440,000 for these extended warranties (approximately evenly throughout the year) Required: 1-0. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty...

  • Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase,...

    Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $444,000 for these extended warranties (approximately evenly throughout the year). Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty...

  • Exercise 13-16 Extended warranties [LO13-5, 13-6] Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's...

    Exercise 13-16 Extended warranties [LO13-5, 13-6] Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are. offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes recejved $432,000 for these extended warranties (approximately evenly throughout the year). Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties...

  • Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides...

    Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides a one-month warranty that is included in the cost of the computer. Claims under the warranties vary from replacing defective items to providing customers with refunds if they choose. During 2020, the estimated costs related to the one-month warranties was $39,600, of which $36,500 had been incurred before year end ($29,700 for replacement items and $6,800 in refunds). For an additional charge of $100,...

  • Exercise 13-16 (Algo) Extended warranties (LO13-5, 13-6) Carnes Electronics sells consumer electronics that carry a 90-day...

    Exercise 13-16 (Algo) Extended warranties (LO13-5, 13-6) Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $414,000 for these extended warranties (approximately evenly throughout the year) Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended...

  • Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides...

    Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides a one-month warranty that is included in the cost of the computer. Claims under the warranties vary from replacing defective items to providing customers with refunds if they choose. During 2020, the estimated costs related to the one-month warranties was $39,600, of which 536,500 had been incurred before year end ($29,700 for replacement items and $6,800 in refunds). For an additional charge of $100,...

  • Ralston Manufacturing began operations in January 2018. Ralston sells computers that carry a two-year manufacturer's warranty...

    Ralston Manufacturing began operations in January 2018. Ralston sells computers that carry a two-year manufacturer's warranty against defects in workmanship. Ralston's management projects that 3% of the computers will require repair during the first year of the warranty while approximately 6% will require repair during the second year of the warranty. The computers sell for $1,100 each. The average cost to repair a computer is $150. The company sells the computers to retail customers who must pay a 6% sales...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT