Question

Waterway 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 385 computers at a unit price of $2,540. On the basis of past experience, the 2-year warranty costs are estimated to be $156 for parts and $196 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) Your answer is correct. 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) Credit Debit Account Titles and Explanation 977900 Cash 135520 Warranty Expense 977900 Sales Revenue 135520 Warranty Liability

Answer 1

	Debit	Credit
Cash	977,900.00
Warranty Expense	135,520.00
Sales Revenue		977,900.00
Warranty Liabilitiy		135,520.00

ii)

	Debit	Credit
Warranty Liability	63,220.00
Inventory		21,450.00
Salaries and Wages Payable		41,770.00