Pronghorn Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2020, the corporation sells for cash 362 computers at a unit price of $2,510. On the basis of past experience, the 2-year warranty costs are estimated to be $163 for parts and $193 for labor per unit. (For simplicity, assume that all sales occurred on December 31, 2020.) The warranty is not sold separately from the computer.
Pronghorn Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2020, the corporation sells for cash 362 computers at a unit price of $2,510. On the basis of past experience, the 2-year warranty costs are estimated to be $163 for parts and $193 for labor per unit. (For simplicity, assume that all sales occurred on December 31, 2020.) The warranty is not sold separately from the computer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be
classified?
Pronghorn Corporation
Balance Sheet (Partial)
$
Transcribed Image Text:Pronghorn Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective parts and
to provide the necessary repair labor. During 2020, the corporation sells for cash 362 computers at a unit price of $2,510. On the basis
of past experience, the 2-year warranty costs are estimated to be $163 for parts and $193 for labor per unit. (For simplicity, assume
that all sales occurred on December 31, 2020.) The warranty is not sold separately from the computer.
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