Selzer Equipment Company sold 500 Rollomatics during 2015 at \($6\),000 each.

During 2015, Selzer spent \($30\),000 servicing the 2-year assurance-type warranties that accompany the Rollomatic.

Instructions

(a) Prepare 2015 entries for Selzer assuming that Selzer estimates the total cost of servicing the warranties will be \($120\),000 for 2 years.

(b) Prepare 2015 entries for Selzer assuming that the warranties are service-type warranties and are not considered part of the sale of the Rollomatics. Assume that of the sales total of the Rollomatics, \($160\),000 relates to sales of warranty contracts. Selzer estimates the total cost of servicing the warranties will be \($120\),000 for 2 years. Estimate revenue related to the servicetype warranties.