ABC manufactures and sells computers that include an assurance type warranty for the first 90 days. ABC offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance type warranty. Because the optional extended coverage plan is sold separately, ABC determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $4,600 on August 1, 2022 and ABC determines the standalone selling price of each is $4,000 and $600, respectively. Further ABC estimates it will incur $300 in costs to repair defects that arise within the 90 day coverage period. The cost of the equipment is $1,800. Assume that the $300 in costs to repair defects in the computers occurred on August 24, 2022. Prepare the entries to record the transactions.

ABC manufactures and sells computers that include an assurance type warranty for the first 90 days. ABC offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance type warranty. Because the optional extended coverage plan is sold separately, ABC determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $4,600 on August 1, 2022 and ABC determines the standalone selling price of each is $4,000 and $600, respectively. Further ABC estimates it will incur $300 in costs to repair defects that arise within the 90 day coverage period. The cost of the equipment is $1,800. Assume that the $300 in costs to repair defects in the computers occurred on August 24, 2022. Prepare the entries to record the transactions.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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