Answer and Explanation:
Brooks Corporation
1. The 2014 cash-basis journal entries will be:
Date Description Debit Credit
2014
DR Cash $1,402,610
($3,110 x 451)
CR Sales Revenue $1,402,610
No Journal entry is recorded for the possible warranty expense in a situation where the cash-basis is used.
2. The 2014 accrual method journal entries will be:
Date Description Debit Credit
2014
DR Cash $1,402,610
CR Sales Revenue $1,402,610
2014
DR Warranty expenses 165,968
($368 x 451)
CR Accrued Warranty Expense 165,968
3. On December 31, 2014, financial statements, there will be an Accrued Warranty Liability in which it will be classified as a current liability unless in a situation where the company can reasonably estimate which portion will be spent in the second year of the warranty period, in which case that portion can be classified as a long-term liability.
4. The 2014 cash-basis journal entries will be:
Date Description Debit Credit
2015
DR Warranty Expense 65,120
CR Wages Expense 41,080
CR Inventory 24,040
5. The 2014 accrual method journal entries will be:
Date Description Debit Credit
2015
DR Accrued Warranty Expense 65,120
CR Wages Expense 41,080
CR Inventory 24,040
