Question: Early in 2017, Buffalo Equipment Company sold 500 Rollomatics during 2017 at $6,500 each. During 2017, Buffalo spent $21,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.
Prepare 2017 entries for Buffalo. Assume that Buffalo estimates the total cost of servicing the warranties will be $60,000 for 2 years. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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Date
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Account
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Debit
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Credit
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At Sale
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Cash
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3,250,000
|
|
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Sales Revenue
|
|
3,250,000
|
|
|
|
|
|
During 2017
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Warranty Expense
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21,000
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|
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Cash, Supplies, Wages
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21,000
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|
|
|
|
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Dec 31, 2017
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Warranty Expense
|
39,000
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|
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Warranty Liability
|
|
39,000
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Prepare 2017 entries for Buffalo assuming that the warranties are not an integral part of the sale (a service-type warranty). Assume that of the sales total, $61,000 relates to sales of warranty contracts. Buffalo estimates the total cost of servicing the warranties will be $60,000 for 2 years. Estimate revenues to be recognized on a straight-line basis. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round intermediate calculations to 5 decimal places, e.g. 1.54657 answers to 0 decimal places, e.g. 5,125.)
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Date
|
Account
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Debit
|
Credit
|
|
At Sale
|
Cash
|
3,250,000
|
|
|
Unearned Warranty Revenue
|
?
|
?
|
|
Sales Revenue
|
?
|
?
|
|
During 2017
|
Warranty Expense
|
?
|
?
|
|
Cash, Supplies, Wages
|
?
|
?
|
|
Dec. 31, 2017
|
Unearned Warranty Revenue
|
?
|
?
|
|
Warranty Revenue
(to record warranty revenue)
|
?
|
?
|
|
Warranty Expense
|
?
|
?
|
|
Warranty Liability
(to record warranty liability)
|
?
|
?
|