Question What are the journal entries for the sale and the related warranty

Question what are the journal entries for the sale

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Question: What are the journal entries for the sale and the related warranty costs for 2015 and 2016?
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Assurance-Type Warranty 2015 Warranty Liability balance of $16,000 (Current liability). The income statement effect in 2015 is Warranty Expense of $20,000. 2016 No warranty liability balance at the end of 2016. No income statement effect. Cash 500,000 Warranty Expense 20,000 Sales Revenue 500,000 Warranty Liability 20,000 Warranty Liability 4,000 Cash or Inventory 4,000 1. Recognize sales of machines and accruals of warranty liability 2. Record payment for warranties incurred Warranty Liability 16,000 Cash or Inventory 16,000 3. Record payment for warranties incurred
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Service-Type Warranty Service-Type Warranty An extended warranty on the product at an additional cost. Usually recorded in an unearned warranty revenue account Recognize revenue on a straight-line basis over the period the service-type warranty is in effect.
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Service-Type Warranty Illustration: You purchase an automobile from Hamlin Auto for $30,000 on January 2, 2014. Hamlin estimates the assurance-type warranty costs on the automobile to be $700 (Hamlin will pay for repairs for two years). You also purchase for $900 a service-type warranty for additional two years. Hamlin incurs warranty costs related to the assurance-type warranty of $500 in 2014 and $200 in 2015. Hamlin records revenue on the service-type warranty on a straight-line basis. Question: What journal entries should Hamlin make in 2014 and 2016?
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Service-Type Warranty 2014 2016 Cash ($30,000 + $900) 30,900 Warranty Expense 700 Sales Revenue 30,000 Unearned Revenue 900 Warranty Liability 700 Warranty Liability 500 Cash or Inventory 500 1. Recognize sales and related warranties 2. Record payment for warranties incurred Unearned Revenue ($900 ÷ 2) 450 Warranty Revenue 450 3. Record revenue in 2016 on the service-type warranty (Straight-line)
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1/10/19 Journal Entries – Asus Co. Cash 6,018,000 Sales Revenue 6,000,000 Unearned Warranty Revenue 18,000 Cost of Goods Sold 4,000,000 Inventory 4,000,000 Asus Co. sold 1,000 desktops on October 1, 2019, at total price of $6,000,000, with a warranty guarantee that the product was free of defects. The cost of the desktops is $4,000,000. The term of this assurance warranty is 2 years, with an estimated cost of $80,000. In addition, Asus sold extended warranties related to 400 laptops for 3 years beyond the 2-year period for $18,000. On November 22, 2019, Asus incurred labor costs of $3,000 and part costs of $25,000 related to the assurance warranties. Asus prepares financial statements on December 31, 2019. It estimates that its future assurance warranty costs will total $44,000 at December 31, 2019. What are the journal entries that Asus Co. should make in 2019 related to the sale of the desktops and warranties? Warranties Record the related extended warranties
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22/11/19 Journal Entries – Asus Co. 31/12/19 Warranty Expense 28,000 Wages payable 3,000 Inventory 25,000 Warranty Expense 44,000 Warranty Liability 44,000 Asus Co. sold 1,000 desktops on October 1, 2019, at total price of $6,000,000, with a warranty guarantee that the product was free of defects. The cost of the desktops is $4,000,000. The term of this assurance warranty is 2 years, with an estimated cost of $80,000. In addition, Asus sold extended warranties related to 400 laptops for 3 years beyond the 2-year period for $18,000. On November
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  • Winter '18
  • jane smith

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