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Date 1. Merritt Equipment Company sells computers for $4,400 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. The cost to Merritt of the computers is $1,875 (this will be the COGS expense). During 2020, the company sold 5,600 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $42 for parts and $75 for labor per computer. (Assume sales all occur at December 31, 2020.) In 2021, Merritt incurred actual warranty costs relative to 2020 computer sales of $101,800 for parts and $235,800 for labor. a. Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2020 and 2021. 1. To record sale of computers (including COGS) for 2020. 2. To record estimated warranty expense at 12/31/20. 3. To record expenditures towards warranty incurred in 2021. Accounts DR CR

Date 1. Merritt Equipment Company sells computers for $4,400 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. The cost to Merritt of the computers is $1,875 (this will be the COGS expense). During 2020, the company sold 5,600 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $42 for parts and $75 for labor per computer. (Assume sales all occur at December 31, 2020.) In 2021, Merritt incurred actual warranty costs relative to 2020 computer sales of $101,800 for parts and $235,800 for labor. a. Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2020 and 2021. 1. To record sale of computers (including COGS) for 2020. 2. To record estimated warranty expense at 12/31/20. 3. To record expenditures towards warranty incurred in 2021. Accounts DR CR

FINANCIAL ACCOUNTING
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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Date 1. 2. 4. Merritt Equipment Company sells computers for $4,400 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. The cost to Merritt of the computers is $1,875 (this will be the COGS expense). During 2020, the company sold 5,600 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $42 for parts and $75 for labor per computer. (Assume sales all occur at December 31, 2020.) 3. In 2021, Merritt incurred actual warranty costs relative to 2020 computer sales of $101,800 for parts and $235,800 for labor. a. Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2020 and 2021. 1. To record sale of computers (including COGS) for 2020. 2. To record estimated warranty expense at 12/31/20. 3. To record expenditures towards warranty incurred in 2021. Accounts DR CR
Transcribed Image Text:Date 1. 2. 4. Merritt Equipment Company sells computers for $4,400 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. The cost to Merritt of the computers is $1,875 (this will be the COGS expense). During 2020, the company sold 5,600 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $42 for parts and $75 for labor per computer. (Assume sales all occur at December 31, 2020.) 3. In 2021, Merritt incurred actual warranty costs relative to 2020 computer sales of $101,800 for parts and $235,800 for labor. a. Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2020 and 2021. 1. To record sale of computers (including COGS) for 2020. 2. To record estimated warranty expense at 12/31/20. 3. To record expenditures towards warranty incurred in 2021. Accounts DR CR
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