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zloy xaker [14]

2 years ago

10

On January 2, 2020, Pronghorn Company sells production equipment to Fargo Inc. for $52,000. Pronghorn includes a 2-year assuranc

e warranty service with the sale of all its equipment. The customer receives and pays for the equipment on January 2, 2020. During 2020, Pronghorn incurs costs related to warranties of $890. At December 31, 2020, Pronghorn estimates that $640 of warranty costs will be incurred in the second year of the warranty.
Required:
Prepare the journal entry to record this transaction on January 2, 2020, and on December 31, 2020.

1 answer:

Yanka [14]2 years ago

6 0

Answer:

January 2, 2020

Dr Cash $52,000

Cr Sales Revenue $52,000

December 31, 2020

Dr Warranty expense $890

Cr Cash $890

December 31, 2020

Dr Warranty expense$640

Cr Warranty Liabiltiy $640

Explanation:

Preparation of the journal entry to record this transaction on January 2, 2020, and on December 31, 2020.

January 2, 2020

Dr Cash $52,000

Cr Sales Revenue $52,000

December 31, 2020

Dr Warranty expense $890

Cr Cash $890

December 31, 2020

Dr Warranty expense$640

Cr Warranty Liabiltiy $640

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S.no. Date Particulars Debit ($) Credit($)

1. 31.03.2020 Bank A/c Dr 2800000

To Equity Share Application A/c Cr 2800000

(Being Application Money received on Shares)

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To Share Capital A/c Cr 2000000

To Share Allotment A/c Cr 800000

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To Equity Share Capital A/c Cr 2000000

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To Equity Share Allotment A/c Cr 1200000

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To Bank A/c Cr 10000

(Being Share issue Expenses paid)

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To Share Capital A/c Cr 450000

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To Share Capital A/c Cr 250000

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To Bank A/c Cr. 50000

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