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GarryVolchara [31]
3 years ago
15

Wright Machinery Corporation manufactures automobile engines for major automobile producers. The engines sell for $940 per engin

e. In addition, customers have the option to purchase a service-type warranty for $70 per engine that protects against any defects for a period of 5 years. During 2019, Wright sold 7,000 engines to National Motors. National Motors purchased warranties on all of the engines purchased. During 2019, Wright repaired defective motors at a cost of $93,400. Prepare the necessary journal entries to record:
1. the sale of engines and service warranty on account during 2016 (one entry).
2. the warranty costs paid during 2016
3. the warranty revenue earned in 2016.
Additional Instructions
Model your entries after the Service-Type Warranties example in your textbook.
For grading purposes, use December 31 to record a summary transaction for entries that would have been made during the year.
Business
1 answer:
Agata [3.3K]3 years ago
7 0

Answer: See explanation

Explanation:

The journal entry is illustrated below:

Dr Cash $7070000

Cr Sales revenue = $940 × 7000 = $6580000

Cr Unearned warranty revenue = $70 × 7000 = $490000

(To record sale of engines and service warranty on account)

Dr Warranty expense $93,400

Cr Cash $93,400

(To record warranty costs paid)

Dr Unearned warranty revenue = $490000/5 = $98000

Cr Warranty revenue $98000

(To record warranty revenue earned)

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