Please solve this question and correct the answers in red. On January 1, 2017, S

Question

Please solve this question and correct the answers in red.

On January 1, 2017, Sandhill Ltd. sold on account 1,200 units of its product for a total price of $571,000 and a cost of $477,000. The products have a one-year assurance-type warranty and Sandhill estimates that the cost will be $26,400. By the company’s year-end December 31, 2017, actual warranty costs related to the products sold was $19,200, paid in cash.

Prepare all appropriate journal entries including the sale of merchandise. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date Account Titles and Explanation Debit Credit January 1/17 Accounts Receivable 571000 Sales Revenue 571000 No Entry No Entry (To record the sale) anuary 1/17 Cost of Goods Sold 477000 Merchandise Inventory 477000 (To record the cost of goods sold) December 31/17 Warranty Expense 26400 Warranty Liability 7200 Cash 19200 (To record warranty costs)

Explanation / Answer

Journal entry for the sale of merchandise:

All of the expenses which are associated with sales during the period are expensed against the accured warranty liability in the expense warranty accrual method.

Here cash is credited against the accrued warranty liability when the cost of warranty is paid.

Date Accounts Debit credit Jan 1 2017 Receivable accounts $571,000 Sales revenue $571,000 (To record sale) Jan 1 2017 Cost of the goods sold $477,000 Merchandise inventory $477,000 (To record the cost of goods sold)

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