Question

Coronado 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 2020, the corporation sells for cash 438 computers at a xperience, the 2-year warranty costs are estimated to be $145 for parts and $175 for labor per unit. (For simplicity, assume that all sales occurred on December 31, 2020.) The warranty is not sold separately from the computer. (a) Record any necessary journal entries in 2020. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Answer 1

Solution Computation of sales revenue Selling price per computer No. of units sold in 2020 Total sales revenues ($2,430 x 438) $2,430 438 $1,064,340 Computation of warranty expense Estimated warranty expense per unit Warranty cost for Parts Warranty cost for labor Estimated warranty expense per unit $145 $175 $320 No. of units sold in 2020 438 Total warranty expense ($320 x 438) $140,160 Required (a): Journal entries in year 2020 Credit Debit $1,064,3401 Account Titles and Explanation Cash Sales revenue (To record sales revenue) $1,064,340 $140,1601 Warranty expense Warranty liabilities (warranty payable) (To record estimated warranty expense) $140,160