Gonzalez Equipment Company sold 1800 Rollomatics during 2017 at $4,000 each. During 2017, Gonzalez spent $90,000 servicing the 2-year warranties on Rollomatic. All applicable transactions are on a cash basis. Instructions:

(a) Prepare 2017 entries for Gonzalez using the expense warranty approach. Assume that Gonzalez estimates the total cost of servicing the warranties will be $260,000 for 2 years.

(b)

Prepare 2017 entries for Gonzalez assuming that the warranties are not an integral part of the sale.

Assume that of the sales total,

$210,000

relates to sales of warranty contracts.

Gonzalez estimates the total cost of servicing the warranties will be

$260,000

for 2 years.

Estimate revenues earned on the basis of costs incurred and estimated costs.

(Tips: warranty sold separately is treated as unearned revenue)