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Leppard Corporation sells DVD players. The corporation also offers its customers a 4-year warranty contract.During 2017,...

Leppard Corporation sells DVD players. The corporation also offers its customers a 4-year warranty contract.During 2017, Leppard sold 20,000 warranty contracts at $99 each. The corporation spent $180,000 servicing warranties during2017. Prepare Leppard’s journal entries for (a) the sale of contracts, (b) the cost of servicing the warranties, and (c) the recognition of warranty revenue. Assume the service costs are inventory costs.

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Answer #1
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General Journal

 Debit Credit
a Cash (20,000 * $99) $   1,980,000
... Unearned warranty revenue $      1,980,000
(To record the sale of contracts)
b

General Journal

 Debit Credit
Warranty revenue $      180,000
                  inventory $         180,000

General Journal

 Debit Credit
c Unearned warranty revenue (20000*99) / 4 $      495,000
             Warranty revenue $         495,000
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