Answer:
(a)Sale contracts
Dr Cash $2,100,000
Cr Unearned warranty revenue $2,100,000
b)Cost of servicing warranty
Dr Warranty expense $189,0000
Cr Inventory $189,000
(c)Recognized warranty revenue
Unearned warranty revenue $525,000
Explanation:
(a)Sale contracts
Dr Cash ($20,000 x105) $2,100,000
Cr Unearned warranty revenue $2,100,000
b)Cost of servicing warranty
Dr Warranty expense $189,0000
Cr Inventory $189,000
(c)Recognized warranty revenue
Unearned warranty revenue $525,000
($2,100,000 ×1/4)
