Sunland Resellers Ltd. (SRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $35,720, of which $23,500 had been incurred before year end ($17,860 on replacement appliances and $5,640 for parts). For an additional charge of $141, SRL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2024, SRL sold 470 three-year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $14,100. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $42,300, which it expects will occur evenly over the warranty period. Prepare journal entries to record the warranty transactions for 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)
Sunland Resellers Ltd. (SRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $35,720, of which $23,500 had been incurred before year end ($17,860 on replacement appliances and $5,640 for parts). For an additional charge of $141, SRL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2024, SRL sold 470 three-year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $14,100. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $42,300, which it expects will occur evenly over the warranty period. Prepare journal entries to record the warranty transactions for 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sunland Resellers Ltd. (SRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is
included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new
appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $35,720, of which
$23,500 had been incurred before year end ($17,860 on replacement appliances and $5,640 for parts).
For an additional charge of $141, SRL also offers extended warranty coverage for three years on its refurbished appliances. This
amount is expected to cover the costs associated with the extended warranties. During 2024, SRL sold 470 three-year warranty plans.
The costs incurred during the year for repairs and replacements under these plans amounted to $14,100. Based on experience, the
company estimates that its total warranty costs over the three-year coverage period will be $42,300, which it expects will occur evenly
over the warranty period.
Prepare journal entries to record the warranty transactions for 2024. (Credit account titles are automatically indented when the amount is
entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. List all debit entries
before credit entries.)
Account and explanation
Debit
Credit
(To record estimated cost
related to 3 month warranties.)
(To record cost incurred
related to 3 month warranties.)
(To record sale of 3 year
extended warranties.)
(To record cost incurred related
to 3 year extended warranties.)
(To record service revenue.)
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