Ayayai Company sells televisions at an average price of $855 and also offers to each customer a separate 3-year warranty contract for $84 that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 327 televisions and 297 warranty contracts for cash. It estimates the 3-year warranty costs as $21 for parts and $31 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2017, and straight-line recognition of warranty revenues occurs.

Account Title Debit Credit

1. Cash (Correct) $304,533 (Correct)

2. Sales Rev. (Correct) $279,585 (Correct)

3. Unearned Sales Warranty (Correct) $24948 (correct)

What liability relative to these transactions would appear on the December 31, 2017, balance sheet and how would it be classified?

Current Liabilities: (Correct)

Unearned Warranty Revenue (Correct) $8316 (Correct)

Long-term Liabilities: (Correct)

Unearned Warranty Revenue (correct) $16632 (Correct)

In 2018, Ayayai Company incurred actual costs relative to 2017 television warranty sales of $2,080 for parts and $4,320 for labor. Record any necessary journal entries in 2018 relative to 2017 television warranties. Use "Inventory" account to record the warranty expense Account Title Debit Credit

1.

2.

(To record the warranty revenue earned.)

1.

2.

3.

4.

(To record the warranty expense.)