Question

On December 31, 2017, 100 units' SUHD (super ultra-high definition) TVs are sold for

$2,000 each, totaling $200,000 sales revenue. The cost of each unit for the company is $1,500. The TVs sold are undertwo-year warranty, free of charge. From the data of the company, it is estimated that the warranty will cost the companyon average $100 per unit over the next two years.

(1) Prepares journal entries for the sales and warranty. Assume the sales were for cash.

                                    

                                                      

(2) During 2018, the actual warranty costs were $4,000. Prepares journal entries for the warranty costs.

(3) During 2019, the actual warranty costs were $5,000. Prepares journal entries for the warranty costs.

Answer 1

A warranty is the type of guarantee that the manufacturer will repair or replace if necessary the product for a specified period of time.

1.	Cash	$ 200,000
	Sales revenue		$ 200,000
	(Being sales of 100 units of SUHD TV in cash for $2000 each)
	Warranty expense	$10,000
	Warranty Payable		$ 10,000
	(Being Warranty expense of $100 per unit sold recorded by creating warranty payables)
2.	Warranty Payables	$ 4000
	Cash		$ 4000
	(Being warranty expense of $4000 serviced for 2018)
3.	Warranty Payables	$ 5000
	Cash		$ 5000
	(Being warranty expense of $5000 serviced for 2019)