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?

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