Question

Waterway Company sold 10,100 Super-Spreaders on December 31, 2020, at a total price of $1,050,400, with a warranty guarantee that the product was free of any defects. The cost of the spreaders sold is $535,300. The assurance warranties extend for a 2-year period and are estimated to cost $37,000. Waterway also sold extended warranties (service-type warranties) related to 1,800 spreaders for 2 years beyond the 2-year period for $10,800. Given this information, determine the amounts to report for the following at December 31, 2020: sales revenue, warranty expense, unearned warranty revenue, warranty liability, and cash. Amounts Reported in Income Sales revenue $ Warranty Expense Amounts Reported on the Balance Sheet Unearned Service Revenue $ Cash Warranty Liability

Answer 1

Amounts Reported in Income

Particulars Amount

- Sales revenue $1,050,400

- Warranty expenses $37,000

Amounts Reported on the Balance Sheet

Particulars Amount

- Unearned service revenue $10,800

- Cash ($1,050,400 + $10,800) $1,061,200

- Warranty Liability $37,000