Carla Vista Resellers Ltd. (CVRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $36,480, of which $24,000 had been incurred before year end ($18,240 on replacement appliances and $5,760 for parts). For an additional charge of $144, CVRL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2024, CVRL sold 480 three-year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $14,400. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $43,200, which it expects will occur evenly over the warranty period. Prepare journal entries to record the warranty transactions for 2024. (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 O for the amounts. List all debit entries before credit entries.) Account and explanation Debit Credit Warranty Expense Warranty Provision (To record estimated cost related to 3 month warranties.) Warranty Provision Parts Inventory (To record cost incurred related to 3 month warranties.) Cash Deferred Warranty Revenue (To record sale of 3 year extended warranties.) Warranty Expense (To record cost incurred related to 3 year extended warranties.) Deferred Warranty Revenue (To record service revenue.) 36,480 24,000 36,480
Carla Vista Resellers Ltd. (CVRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $36,480, of which $24,000 had been incurred before year end ($18,240 on replacement appliances and $5,760 for parts). For an additional charge of $144, CVRL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2024, CVRL sold 480 three-year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $14,400. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $43,200, which it expects will occur evenly over the warranty period. Prepare journal entries to record the warranty transactions for 2024. (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 O for the amounts. List all debit entries before credit entries.) Account and explanation Debit Credit Warranty Expense Warranty Provision (To record estimated cost related to 3 month warranties.) Warranty Provision Parts Inventory (To record cost incurred related to 3 month warranties.) Cash Deferred Warranty Revenue (To record sale of 3 year extended warranties.) Warranty Expense (To record cost incurred related to 3 year extended warranties.) Deferred Warranty Revenue (To record service revenue.) 36,480 24,000 36,480
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Carla Vista Resellers Ltd. (CVRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is
included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new
appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $36,480, of which
$24,000 had been incurred before year end ($18,240 on replacement appliances and $5,760 for parts).
For an additional charge of $144, CVRL also offers extended warranty coverage for three years on its refurbished appliances. This
amount is expected to cover the costs associated with the extended warranties. During 2024, CVRL sold 480 three-year warranty
plans. The costs incurred during the year for repairs and replacements under these plans amounted to $14,400. Based on experience,
the company estimates that its total warranty costs over the three-year coverage period will be $43,200, which it expects will occur
evenly over the warranty period.
Prepare journal entries to record the warranty transactions for 2024. (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 O for the amounts. List all debit entries
before credit entries.)
Account and explanation
Debit
Credit
Warranty Expense
Warranty Provision
(To record estimated cost
related to 3 month warranties.)
Warranty Provision
Parts Inventory
(To record cost incurred
related to 3 month warranties.)
Cash
Deferred Warranty Revenue
(To record sale of 3 year
extended warranties.)
Warranty Expense
(To record cost incurred related
to 3 year extended warranties.)
Deferred Warranty Revenue
(To record service revenue.)
36,480
24,000
36,480
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