On December 31, 2014, Biker Company sells equipment to Mame Company. for $62,500. Biker includes a 1-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2014. Biker estimates the prices to be $61,000 for the equipment and $1,500 for the cost of the warranty.
Instructions
(a) Prepare the journal entry to record this transaction on December 31, 2014.
(b) Repeat the requirements for (a), assuming that in addition to the assurance warranty, Biker sold an extended warranty (service type warranty) for an additional 2 years (2016–2017) for $1,000.