Refer to the information for Jupiter Corp. in BE13.25. (a) 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. Ignore any cost of goods sold entry. Sales in 2023 occurred evenly throughout the year. Warranty agreements similar to this are available separately, are estimated to have a stand-alone value of $600,000, and are earned over the warranty period as follows: 2023, 25%; 2024, 50%; and 2025, 25%. (b) Also prepare the entry(ies) to record the $68,000 expenditure for servicing the warranty during 2023, and the adjusting entry required at year end, if any, under the revenue approach used for service-type warranties.

BE13.25

Jupiter Corp. provides at no extra charge a two-year warranty with one of its products, which was first sold in 2023. In that year, Jupiter sold products for $2.5 million and spent $68,000 servicing warranty claims. At year end, Jupiter estimates that an additional $420,000 will be spent in the future to service warranty claims related to the 2023 sales. Prepare Jupiter’s journal entry(ies) to record the sale of the products, the $68,000 expenditure, and the December 31 adjusting entry under the assurance-type warranty approach. Ignore any cost of goods sold entry.