In 2020, Carpenter Inc. sells a product that carries a separate, three-year warranty for parts and labor on service for $50 per product. Sales of products totaled $50,000 where customers also purchased the $50 warranty, result- ing in total warranty sales of S5,000. On the basis of experience, it is estimated that for the three-year warranty, costs are 2% of sales for parts and 3% for labor and overhead. Actual warranty service costs were $1,000 in 2020 and $800 in 2021. The company uses straight-line recognition of warranty revenue. For simplification, assume that sales occurred at the first of the year. Required Record the journal entries required for the following. 1. Sale of the products and warranties in 2020. 2. Incurred warranty costs in 2020 and 2021. 3. Recognition of warranty revenue for 2020 and 2021. What liability would be reported on the balance sheet at the end of 2020 and 2021? a. b.

In 2020, Carpenter Inc. sells a product that carries a separate, three-year warranty for parts and labor on service for $50 per product. Sales of products totaled $50,000 where customers also purchased the $50 warranty, result- ing in total warranty sales of S5,000. On the basis of experience, it is estimated that for the three-year warranty, costs are 2% of sales for parts and 3% for labor and overhead. Actual warranty service costs were $1,000 in 2020 and $800 in 2021. The company uses straight-line recognition of warranty revenue. For simplification, assume that sales occurred at the first of the year. Required Record the journal entries required for the following. 1. Sale of the products and warranties in 2020. 2. Incurred warranty costs in 2020 and 2021. 3. Recognition of warranty revenue for 2020 and 2021. What liability would be reported on the balance sheet at the end of 2020 and 2021? a. b.

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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