In 2020, Pluto Company started selling new computer that carried a 2-year warranty against defects. Based on the manufacturer's recommendations, the entity estimated warranty cost as a percentage of sales. First year of warranty - 3% Second year of warranty - 9% 2020 2021 Sales 5,000,000 7,000,000 Actual warranty repairs 100,000 250,000 Prepare the necessary journal entries to record this transaction, using the expense as incurred approach, for the years 2020 and 2021.

In 2020, Pluto Company started selling new computer that carried a 2-year warranty against defects. Based on the manufacturer's recommendations, the entity estimated warranty cost as a percentage of sales. First year of warranty - 3% Second year of warranty - 9% 2020 2021 Sales 5,000,000 7,000,000 Actual warranty repairs 100,000 250,000 Prepare the necessary journal entries to record this transaction, using the expense as incurred approach, for the years 2020 and 2021.

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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Required: 1. Prepare journal entries in connection with the warranty using the “expense as incurred” approach.2. Prepare journal entries in connection with the warranty using the “accrual” approach.
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