Answer:
<em>On September 11, 2016, Home Store sells a mower for $490 cash with a one-year warranty that covers parts</em>
<u>Recording of revenue:</u>
Cash $490 (debit)
Revenue $490 (credit)
<u>Recording of Warranty granted :</u>
Assurance Warranty expense $49.00 (debit)
Warranty Provision $49.00 (credit)
$490 × 10% = $49.00
<em>On July 24, 2017, the mower is brought in for repairs covered under the warranty requiring $34 in materials taken from the Repair Parts Inventory</em>
<u>When warranty is subsequently received:</u>
Warranty Provision $ 34 (debit)
Repair Parts Inventory $ 34 (credit)
Explanation:
<em>On September 11, 2016, Home Store sells a mower for $490 cash with a one-year warranty that covers parts</em>
<u>Recording of revenue:</u>
Cash $490 (debit)
Revenue $490 (credit)
<em>We Recognise Revenue to depict transfer of control of mower</em>
<u>Recording of Warranty granted :</u>
Assurance Warranty expense $49.00 (debit)
Warranty Provision $49.00 (credit)
$490 × 10% = $49.00
<em>There is no option for customer to take the warranty or not, so this is a service warranty.The warranty is measured at the best estimate of expenditure required to settle the obligation that is at 10% of sales.</em>
<em>On July 24, 2017, the mower is brought in for repairs covered under the warranty requiring $34 in materials taken from the Repair Parts Inventory</em>
<u>When warranty is subsequently received:</u>
Warranty Provision $ 34 (debit)
Repair Parts Inventory $ 34 (credit)
<em>Utilise the Warranty Provision when the warranty claim is subsequently received</em>
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