Question

The company also offers a 3 year extended warranty for $56. Total sales of coffee pots during 2022 $245,000 Amount of total sales that relates to extended warranty contracts $36,000 Estimated total cost of servicing warranties for the 3 years $30,000 Amount spent during 2022 servicing these warranties $8,000 PREPARE THE JOURNAL ENTRIES TO: Record the sale of the coffee pots Record the warranty expense for the year Record the warrnany revenue for the year

Answer 1

The journal entries for the sale of coffee pots, warranty expense, and warranty revenue include debits to Accounts Receivable and Warranty Expense, and credits to Sales Revenue, Warranty Liability, and Unearned Warranty Revenue for the amounts of $245,000, $8,000, and $36,000 respectively.

Step-by-step explanation:

The student's question pertains to the recording of financial transactions in journal entries for the sales of coffee pots and the associated extended warranty contracts. Below I will outline the necessary journal entries.

Journal Entry to Record the Sale of Coffee Pots

Debit: Accounts Receivable $245,000
Credit: Sales Revenue $245,000

This entry records the total sales of coffee pots for the year.

Journal Entry to Record the Warranty Expense for the Year

Debit: Warranty Expense $8,000
Credit: Warranty Liability $8,000

This entry represents the actual amount spent servicing warranties during the year.

Journal Entry to Record the Warranty Revenue for the Year

Debit: Cash or Accounts Receivable $36,000
Credit: Unearned Warranty Revenue $36,000

This entry records the revenue received from the sale of extended warranty contracts, which is initially recorded as a liability because the service has not yet been provided.