Refer to data for Jupiter Corp. in BE13-20. Prepare entries for the warranty that recognize the sale as a multiple deliverable with the warranty as a separate service that Jupiter bundled with the selling price of the product.
Warranty agreements similar to this are available separately, are estimated to have a standalone value of $600,000, and are earned evenly over the warranty period. Also prepare the entry(ies) to record the $63,000 expenditure for servicing the warranty during 2011, and the adjusting entry required at year end, if any, under the revenue approach.