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. - Your answer is partially correct. for Record any necessary journal entries in 2020. (If no entry is required, select "No Entry for the account titles and enter the amounts Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Credit Account Titles and Explanation Cash 977900 842380 Sales Revenue 60060 Warranty Expense 75460 Salaries and Wages Expense

Answer 1

Answer: Credit Accounts Titles & Explanation Cash Warranty Expense Sales Revenue Warranty Liability Debit 977,900 135,520 977,900 135,520 Calculation: Cash = 385 * $2,540 Cash = $977,900 Warranty Expense = 385 * ($156 + $196) Warranty Expense = 385 * $352 Warranty Expense = $135,520