Question

Pina Company sold 196 color laser copiers on July 10, 2017, for $3,670 apiece, together with a 1-year warranty. Maintenance on each copier during the warranty period is estimated to be $319. Prepare entries to record the sale of the copiers, the related warranty costs, and any accrual on December 31, 2017. Actual warranty costs (inventory) incurred in 2017 were $17,370.

Answer 1

To record the sale of the copiers, debit Accounts Receivable and credit Revenue. Record warranty costs as an expense. On December 31, record an accrual for estimated warranty costs.

Step-by-step explanation:

To record the sale of the copiers, we will debit Accounts Receivable and credit Revenue for the total sale amount. The warranty costs will be recorded as an expense in the Warranty Expense account.

On December 31, 2017, we will record the accrual for the estimated warranty costs by debiting Warranty Expense and crediting Warranty Liability. The actual warranty costs incurred in 2017 will be recorded as an expense in the Warranty Expense account and credited to Warranty Liability.

Answer 2

The journal entry to record the sale of the laser copiers

July 10, 2017, 196 laser copiers sold

Dr Cash 719,320

Cr Sales revenue 719,320

The journal entry to record the warranty expense

July 10, 2017, warranty expense for 196 laser copiers sold

Dr Warranty expense 62,524

Cr Warranty liability 62,524

The journal entry to record warranty costs

December 31, 2017, warranty costs for 196 laser copiers sold

Dr Warranty liability 17,370

Cr Inventory 17,370

The company cannot record any revenue resulting from the warranty liability because the warranty is still valid.