Question

Prepare entries to record the sale of the copiers, the related warranty costs, and any accrual on December 31, 2020. Actual warranty costs (inventory) incurred in 2020 were $17,400

Answer 1

Answer:

Computation of Sales     = Price x Quantity

                                         = $4,130 x 186 = $768,180

ENTRIES TO RECORD THE SALES                          

Debit   cash            $768,180

Credit  Sales           $768,180

Being sales of 186 color laser copiers at $,4,130 each

ACCRUAL FOR WARRANTY

Maintenance on each copier during the warranty period is estimated to be $355.

Total provision for warranty = 186 x $355

                                              = $66,030

JOURNAL ENTRIES

Debit   Warranty Expenses     $66,030

Credit  Warranty Liability         $66,030

Being provision for warranty for the sales of 186 color laser copiers

ACTUAL WARRANTY COST INCURRED

JOURNAL ENTRIES

Debit   Warranty Liability         $17,400

Credit  Inventory                      $17,400

Being warranty expenses paid from inventory

Explanation:

ENTRIES TO RECORD THE SALE

Total sales made is price per unit multiplied by the number sold. and the accounting entry is a debit to cash if sold on cash or a debit to receivable if sold on credit.

ACCRUAL FOR WARRANTY

Since maintenance on each copier  during the warranty period is estimated to be $355, it means the total provision for warranty will be $355 multiplied by 186 to get $66,030. the journal entries will be a debit to expense for warranty and a corresponding credit to warranty provision account for $66,030

ACTUAL WARRANTY COST INCURRED

Inventory item of $17,400 was given to satisfy the warranty. To record the actual warranty cost incurred, debit warranty liability account and credit the respective inventory account for $17,400.