Question

New Age Computers manufactures and sells pagers and radio paging systems which include a 180 day warranty on product defects. It also sells an extended warranty which provides an additional two years of protection. On May 10, it sold a paging system for $4,500 and an extended warranty for another $1,400. The journal entry to record this transaction would include:

Answer 1

Given that,

sold a paging system = $4,500

Sold extended warranty = $1,400

The journal entry to record this transaction would include:

(i) cash account Dr. $4,500

To Sales A/c $4,500

(To record the sales)

(ii) Cash A/c Dr. $1,400

To Unearned revenue A/c $1,400

(To record the service revenue)