Question

Early in 2020, Tamarisk Equipment Company sold 600 Rollomatics at $5,400 each. During 2020, Tamarisk spent $21,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.
Required:
Prepare 2020 entries for Tamarisk. Assume that Tamarisk estimates the total cost of servicing the warranties in the second year will be $31,000.

Answer 1

Answer:

Dr Cash 3,240,000

Cr Sales Revenue 3,240,000

Dr Warranty Expense 21,000

Cr Cash 21,000

Dr Warranty Expense 10,000

Cr Estimated Liabilities Warranties 10,000

Explanation:

Preparation of 2020 Journal entries

Dr Cash 3,240,000

Cr Sales Revenue 3,240,000

(600 x $5,400)

(Being to Record sale of Rollomatics )

Dr Warranty Expense 21,000

Cr Cash 21,000

( Being to record the amount spent on servicing during the year)

Dr Warranty Expense 10,000

Cr Estimated Liabilities Warranties 10,000

(31,000-21,000)

(Being To record the Estimated remaining warranty expense)