Question

Instructions On September 1, 2016, Carolina Electronics Company has 1,120 Blu-ray players ready for sale. on October 1, 2016, 870 are sold. on account at $130 each with a assurance-type warranty Carolina estimates that the warranty cost on each Blu-ray player sold will probably average $10 per unit. During the inal 3 months of 2016, Carolina incurred waranty costs of $3.250, and in 2017 warranty costs were $5.450 Required: 1. Prepare the journal entries for the preceding transactions 2. Show how the preceding items would be reported on the December 31, 2016, balance sheet 3. Prepare the journal entries for the preceding transactions using the modified cash basis method 4. Next Level Which method produces the better measure of income? Why?

Answer 1

	Account Description	Debit	Credit
1-Oct	Accounts Receivable	113,100.00
	Sales Revenue		113,100.00
	(Being Sales Recorded)
1-Oct	Warranty Expense*	8,700.00
	Estimated Warranty Liability		8,700.00
	(Being Warranty Liability Recorded)
31-Dec	Estimated Warranty Liability	3,250.00
	Warranty Expense		3,250.00
	(Being Warranty Claimed by Customer)
2017'	Estimated Warranty Liability	3,250.00
	Warranty Expense		3,250.00
	(Being Warranty Claimed by Customer)

Balance sheet(Partial)
Current Liability	5,450.00

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