Question

Marin Inc. sells portable computer equipment with a two-year warranty contract that requires the corporation to replace defective parts and provide the necessary repair labour. During 2020, the corporation sells for cash 380 computers at a unit price of $2,550. Ignore any cost of goods sold. Based on experience, the two-year warranty costs are estimated to be $166 for parts and $189 for labour per unit. (For simplicity, assume that all sales occurred on December 31, 2020.) The warranty is not sold separately from the equipment, and no portion of the sales price is allocated to warranty sales. Marin follows ASPE.

1. (Double-check if correct please)

Record the 2020 journal entry, assuming the cash basis is used to account for the warranties. (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 tities and enter for the amounts.) Account Titles and Explanation Debit Credit Cash 969000 Sales Revenue 969000

2. (Double-check if correct please)

3. (I have the first part just need the second part)

4.

5.

Answer 1

Answer 1 Journal Entries:- cash Basis S.No Particulars 2020 Cash A/c To Sales Revenue A/c (To record sales, 380 units @ 2,550) Dr. Debit ($) Credit ($) 9,69,000 9,69,000 Dr. Debit ($) Credit ($) 9,69,000 9,69,000 2 Journal Entries:- Accural Basis S.No Particulars 2020 Cash A/C To Sales Revenue A/c (To record sales , 380 units @ 2,550) Warranty Expense A/c To Warranty Liability A/c (To record warranty liability) Dr. 1,34,900 1,34,900 Warranty Expense = 380 units X (166 +189) = 380 units x 355 = 134900

3 Marin Inc. Balance Sheet (Partial) As at December 31, 2020 Amount($) Short term liabilities: Warranty liability = (1,34,900 /2) Long term liabilities: Warranty liability = (1,34,900 /2) 67,450 67,450 Dr. 4 Journal Entries:- cash Basis S.No Particulars 2021 Warranty Expense A/C To Inventory A/C To Salaries Payable (Labour cost) A/C (To record warranty expenses) Debit ($) Credit ($) 61,010 21,626 39,384 Dr. 5 Journal Entries:- Accural Basis S.No Particulars 2021 Warranty liability A/C To Inventory A/C To Salaries Payable (Labour cost) A/C (To record warranty expenses incurred) Debit ($) Credit ($) 61,010 21,626 39,384