Question

Sarasota 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 2017, the corporation sells for cash 404 computers at a unit price of $2,440. On the basis of past experience, the 2-year warranty costs are estimated to be $165 for parts and $205 for labor per unit. (For simplicity, assume that all sales occurred on December 31, 2017.) The warranty is not sold separately from the computer.

Record any necessary journal entries in 2017. (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 the amount is entered. Do not indent manually.)

account title and explanation	debit	credit

What liability relative to these transactions would appear on the December 31, 2017, balance sheet and how would it be classified?

Sarasota Corporation Balance Sheet (Partial) December 31, 2017
balance sheet classification: (e.g. current assets)
account	amount xx
balance sheet classification:
account	amount xx

In 2018, the actual warranty costs to Sarasota Corporation were $22,210 for parts and $38,080 for labor.

Record any necessary journal entry in 2018. (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 the amount is entered. Do not indent manually.)

account title and explanation	debit	credit

Answer 1