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Apple sells a phone for $2,000, they also offer a four year warranty for $100 that...

Apple sells a phone for $2,000, they also offer a four year warranty for $100 that ensures the phone would function correctly. in 2018, Apple sold 1700 phones and 875 warranties for cash. Apple estimates that the labor cost would be $60 over the four year warranty.

assume the 2018 sales happened at the end of december

record all entries for december 2018.

what liability would appear on the balance sheet for december 31st 2018 and what would it be classified.

in 2019, apple incurred actual costs of 18,000 related to the warranty contracts that were sold in 2018.

record the correct 2019 entries relating to the 2018 warranty contracts.

what liability would appear on the balance sheet for december 31st 2019 and what would it be classified.

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Answer #1

Journal entries for 2018 1 Cash Account (170 100) 1,70,000 To Sales Account 1,70,000 2 Cash Account (875*100) 87,500 To Warranty Sales Account 87,500 3 Warranty Expense Account 52,500 To Accrued warranty Liability (875 warranty sale *60 Labour cost) 52,500 Accrued warranty liability will appear on the balance sheet Liability side for 52,500 for the year ended 2018 Classification:-Accrued Warranty liability will be classified Under Long-Term Liability in the Balance Sheet. As Warranty period is for more than One year (i.e., 4 years) it is classified Under Long-Term Liability Journal entries for 2019 1 Accrued liability Account 18,000 To Cash Account 18,000 Accrued warranty liability will appear on the balance sheet Liability side for 34,500 (52,500 18,000) for the year ended 2019 ClassificationAccrued Warranty liability will be classified Under Long-Term Liability in the Balance Sheet. As Warranty period is for more than One year (i.e., 4 years) it is classified Under Long-Term Liability

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