Question

Exercise 13-11 Early in 2020, Shamrock Equipment Company sold 500 Rollomatics at $6,300 each. During 2020, Shamrock spent $20,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.

Prepare 2020 entries for Shamrock. Assume that Shamrock estimates the total cost of servicing the warranties in the second year will be $34,000. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
At SaleDuring 2020Dec. 31, 2020
At SaleDuring 2020Dec. 31, 2020
At SaleDuring 2020Dec. 31, 2020

SHOW LIST OF ACCOUNTS

Prepare 2020 entries for Shamrock assuming that the warranties are not an integral part of the sale (a service-type warranty). Assume that of the sales total, $55,000 relates to sales of warranty contracts.Warranty costs incurred in 2020 were $20,000. Estimate revenues to be recognized on a straight-line basis. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round intermediate calculations to 5 decimal places, e.g. 1.54657 answers to 0 decimal places, e.g. 5,125. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
At SaleDuring 2020Dec. 31, 2020
At SaleDuring 2020Dec. 31, 2020
At SaleDuring 2020Dec. 31, 2020
	(To record warranty revenue)

Answer 1

(1)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31,2020	Cash (500* $6,300)	$3,150,000
	Sales Revenue		$3,150,000
	(To record sales of Rollomatics)
Dec. 31,2020	Warranty Expense	$20,000
	Cash		$20,000
	(To record Warranty service)
Dec. 31,2020	Warranty Expense ($34,000 - $20,000)	$14,000
	Warranty liability		$14,000
	(To record remaining warranty liabilities)

(2)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31,2020	Cash (500* $6,300)	$3,150,000
	Sales revenue		$3,095,000
	Unearned warranty revenue		$55,000
	(To record sale of Rollomatics)
Dec. 31,2020	Warranty Expense	$20,000
	Cash		$20,000
	(To record Warranty service)
Dec. 31,2020	Unearned Warranty revenue ($55,000/2 years)	$27,500
	Warranty revenue		$27,500
	(To record Warranty revenue)