Problem 156 Merritt Equipment Company sells computers for $1,320 each and also g

Question

Problem 156 Merritt Equipment Company sells computers for $1,320 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 940 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $40 for parts and $60 for labor. (Assume sales all occur at December 31, 2017.) In 2018, Merritt incurred actual warranty costs relative to 2017 computer sales of $10,000 for parts and $15,000 for labor. Under the expense warranty approach, give the entries to reflect the above transactions accrual method i 2017 and 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually) Date Account Titles and Explanation 2017 Debit Credit (To record sale of computers) 2017 (To record liability against warranty costs) 2018 SHOW LIST OF ACCOUNTS The transactions of part (a) create what balance under current liabilities in the 2017 balance sheet? Current Liabilities- Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS

Explanation / Answer

Journal entries:

2017 Accounts receivable $1240800

To sales revenue $1240800

2017 Warranty expense $94000

To warranty liability $94000

2018 Warranty liability $25000

To inventory $10000

To cash $15000

2017 Current liability $47000 ($94000 / 2 years).

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---