Question

Exercise 18-27 Oriole Inc. manufactures and sells computers that include an assurance-type warranty for the first 90 days. Oriole offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance-type warranty. Because the optional extended coverage plan is sold separately, Oriole determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,830 on October 1, 2017, and Oriole determines the standalone selling price of each is $3,420 and $410, respectively. Further, Oriole estimates, based on historical experience, it will incur $190 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,440. Assume that the $190 in costs to repair defects in the computers occurred on October 25, 2017. (a) Prepare the journal entry(ies) to record the October transactions related to sale of the computers. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 fo

Answer 1

Solution:

Journal Entries - Oriole Inc.
Date	Particulars	Debit	Credit
1-Oct-17	Cash Dr	$3,830.00
	To Sales revenue		$3,420.00
	To Unearned warranty revenue		$410.00
	(To record sales)
1-Oct-17	Cost of goods sold Dr	$1,440.00
	To Inventories		$1,440.00
	(To record cost of goods sold)
25-Oct-17	Warranty Expense Dr	$190.00
	To Cash		$190.00
	(To record payment of warranty expense)