Dos Passos SA sells televisions at an average price of R$900 and also offers to each customer a separate 3-year warranty contract for R$90 that requires the company to perform periodic services and to replace defective parts. During 2019, the company sold 300 televisions and 270 warranty contracts for cash. It estimates the 3-year warranty costs as R$20 for parts and R$40 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2019, and straight-line recognition of warranty revenues occurs.
Instructions
a. Record any necessary journal entries in 2019.
b. What liability relative to these transactions would appear on the December 31, 2019, statement of financial position and how would it be classified?
In 2020, Dos Passos incurred actual costs relative to 2019 television warranty sales of R$2,000 for parts and R$4,000 for labor.
c. Record any necessary journal entries in 2020 relative to 2019 television warranties.
d. What amounts relative to the 2019 television warranties would appear on the December 31, 2020, statement of financial position and how would they be classified?