Question

Talarczyk Company sold 10,000 Super-Spreaders on December 31, 2017, at a total price of $1,000,000 cash, with a warranty guarantee that the product was free of any defects. The cost of the spreaders sold is $550,000. The assurance warranties extend for a 2-year period and are estimated to cost $40,000. Talarczyk also sold extended warranties (service-type warranties) related to 2,000 spreaders for 2 years beyond the 2-year period for $12,000 cash. Given this information, determine the amounts to report for the following at December 31, 2017: sales revenue, warranty expense, unearned warranty revenue, warranty liability, and cash.

Answer 1

Step-by-step explanation:

Sales revenue to be reported - $1,000,000

Warranty expense - $40,000

Unearned warranty revenue - $12,000

Cash = 1,000,000+12,000 = $1,012,000

Warranty liability - $40,000