Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers areoffered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $416,00for these extended warranties (approximately evenly throughout the year).Required:1-a. Does this situation represent a loss contingency?1.b. How should it be accounted for?2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recordedduring the year.Complete this question by entering your answers in the tabs below.Reg 1AReq 1BReq 2Does this situation represent a loss contingency?Loss contingencyComplete this question by entering your answers in the tabs below.Req 1AReq 1BReq 2How should it be accounted for?Revenue is deferred as aand warranty expense is computed using thein 2021.< Req 1AReq 2 >Req 1AReq 1BReq 2Prepare journal entries that summarize sales of the extended warranties and any aspects of the warrantythe year. (If no entry is required for a transaction/event, select "No journal entry required" in the first accito 2 decimal places.)View transaction listJournal entry worksheet12>Record the sale of extended warranty.Note: Enter debits before credits.EventGeneral JournalDebitCredit1Record entryClear entryView general journal< Req 1BReq 2 >Req 1AReq 1BReq 2Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recorded duringthe year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answersto 2 decimal places.)View transaction listJournal entry worksheet12>Record the revenue earned on extended warranty.Note: Enter debits before credits.EventGeneral JournalDebitCredit2Record entryClear entryView general journal< Req 1BReq 2 >

1A) Loss contingency - No 1B) Revenue is deferred as a liability and the warranty expense is…

Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $416,00 for these extended warranties (approximately evenly throughout the year). Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recorded during the year.

Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $416,00 for these extended warranties (approximately evenly throughout the year). Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recorded during the year.

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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