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E1B-215 [Warranties] Eaton Inc. manufactures and sells computers that include an assurance- type warranty tor the tirst 9-3- days. Eaton otters an optional extended coverage
E1B-215 [Warranties] Eaton Inc. manufactures and sells computers that include an assurance- type warranty tor the tirst 9-3- days. Eaton otters an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurancetype warranty. Because the optional extended coverage plan is sold separately, Eaton determines that the 3 years of extended coverage represent a separate performance obligation. The total transaction price tor the sale of a computer and the extended warranty is $2300 on October 1, 214, and Eaton determines the standalone selling price of each is $2 .4011} and $30G. respectively. Furtherr Eaton estimates. based on historical experience, it will incur $200 in costs to repair detects that arise within the 90-day coverage period for the assurance-type warranty. The cost ot the equipment is $1,100. Instructions {a} Prepare the journal entry es) to record the sale of the computer. cost of goods sold, and liabilities related to the warranties. (b) Briefly describe the accounting for the service-type warranty after the 90day assurance-type warranty period
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