Answer:
Explanation:
Palmer Music manufactures and sells MP3 players and sound systems that include a 180-day warranty on product defects. The company also sells 2-year extended warranties. On May 10, Palmer sold a sound system for $3,850 and an extended warranty for another $1,200.
What would be included in the journal entry to record this transaction is
Dr. Cash (3850+1200)...........5,050
Cr. Sales..............................................3,850
Cr. Prepaid Income (Warranty).......1,200
The warranty amount will not be included in the sale amount because it has not been earned, it will only be earned after the expiration of the warranty period.