Andrews ltd needs some security equipment to undertake surveillance of the Victorian population. Crisp Ltd. agrees to manufacture the equipment

which has a cost of $15,000,000 and provides a 5 year warranty for the equipment. The equipment is delivered on 1 July 2020.

While their equipment is considered reliable, experience dictates that the following level of repairs will likely be required for the period of the warranty and a discount rate of 11% is appropriate. This should be recognised at the date of sale.

Year Value

1 220,000

2 176,000

3 132,000

4 88,000

5 44,000

Total: 660,000

By 30 June 2021 the equipment has been found to be much more reliable than expected and Crisp Ltd has spent only $185,000 repairs. The following is not the best estimate of warranty costs and a discount rate of 9% is now appropriate.

Year Value

1

2 140,000

3 100,000

4 60,000

5 20,000

Total: 320,000

1) Provide any journal entries for the provision on 1 July 2020

2) Provide any journal entries for the provision on 30 June 2021.