Early in 2020, Ayayai Equipment Company sold 500 Rollomatics at $6,100 each. During 2020, Ayayai spent $22,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All sales transactions are on a cash basis.

(A) Prepare 2020 entries for Ayayai. Assume that Ayayai estimates the total cost of servicing the warranties in the second year will be $30,000.

(B) Prepare 2020 entries for Ayayai assuming that the warranties are not an integral part of the sale (a service-type warranty). Assume that of the sales total, $53,000 relates to sales of warranty contracts. Warranty costs incurred in 2020 were $22,000. Estimate revenues to be recognized on a straight-line basis.