Answer:
A. Dr Cash $2,184,000
Cr Unearned warranty revenue $2,184,000
B. Dr Warranty expense $182,000
Cr Inventory $182,000
C. Dr Unearned warranty revenue 364,000
Cr Warranty revenue 364,000
Explanation:
a. Preparation of thr Leppard’s journal entries for the sale of contracts
Dr Cash $2,184,000
($20,000 x$109.20 each)
Cr Unearned warranty revenue $2,184,000
(Being to record sale of contracts)
b. Preparation of Leppard’s journal entries for the cost of servicing the warranties.
Dr Warranty expense $182,000
Cr Inventory $182,000
(Being to record Cost of servicing warranty)
c. Preparation of Leppard’s journal entries for the recognition of warranty revenue.
Dr Unearned warranty revenue 364,000
Cr Warranty revenue 364,000
(Being to record recognized warranty revenue)
Calculation for recognized warranty revenue
First step is to calculate the Total expected cost
Total expected cost = 182,000 + 910,000
Total expected cost= 1,092,000
Now let calculate warranty revenue
Warranty revenue=182,000/ 1,092,000 x $2,184,000
Warranty revenue = 364,000
