Answer:
A) Cash Basis used for recording entries
Date | Particulars | Debit ($) | Credit ($) | |
31.Dec 2017 | Bank A/c Dr. (2380*382) | 909160 | ||
To Sales A/c (2380*382) | 909160 | |||
(Being entry for sale of portable computer) |
There will be no entry for provision warranty cost will be recorded as warranty cost is to be recorded when it occur.
B) Accrual Basis used for recording entries
Date | Particulars | Debit ($) | Credit ($) | |
31.Dec 2017 | Bank A/c Dr. (2380*382) | 909160 | ||
To Sales A/c (2380*382) | 909160 | |||
(Being entry for sale of portable computer) | ||||
31.Dec 2017 | Warranty Expenses A/c Dr. | 132554 | ||
To Provision For Warranty Expenses A/c | 132554 | |||
(being warranty expenses recorded) | ||||
31.Dec 2017 | Profit & loss A/c Dr. | 132554 | ||
To Warranty Expenses A/c | 132554 | |||
(Being entry for transfer of warranty expenses to Profit and Loss A/c) |
Warranty Expenses =(( $157+ $190)*382)
= $ 132554
c) There is no presentation of Warranty expenses in Balance sheet in case of Warranty expenses recorded in cash basis.
Warranty expenses will be shown as Current Liabilities in the balance sheet when Warranty expenses are recorded in accrued basis.
d) Journal Entries
Warranty expenses incurred = Labour + Parts
= $ 40145 + $ 22217
= $62362
Date | Particulars | Debit ($) | Credit ($) | |
31.Dec 2018 | Warranty Expenses A/c Dr. | 62362 | ||
To Bank A/c | 62362 | |||
( Being Warranty expenses Paid ) | ||||
e) Journal Entries Warranty Expenses recorded on Accrual Basis
Date | Particulars | Debit ($) | Credit ($) | |
31.Dec 2018 | Provision for Warranty Expenses A/c Dr. | 62362 | ||
To Bank A/c | 62362 | |||
( Being Warranty expenses Paid ) | ||||
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