Hi there here is the question and solution for a warranty type question. What i do not understand is how they got the forth entry in the first part. The 19,700. Also, for the last part how did they get the 53,808 and the 26,904.

Also, if you can please explain overall the general accounts that were chosen and why. I do not understand this type of question. Why do they use the accounts they use can someone break it down ?

On 30 April 20X2, Neuman Ltd. sells a product to a customer for $708,000. The product carries a one-year assurance warranty. Neuman management estimates that the probable cost of fulfilling the warranty will be $59,000. Between 1 May and 31 December 20X2, the actual warranty cost was $23,600. On 31 December 20X2. management decides that the probable additional warranty cost will be no more than $15,700. Between 1 January and 30 April 20X3, the additional cost was $13,700. Required: 1. Prepare the entries concerning the sale and the warranty for 30 April 20X2 through 30 April 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Required: 1. Prepare the entries concerning the sale and the warranty for 30 April 20 30 April 20X3. (If no entry is required for a transaction/event, select " entry required" in the first account field.) No Credit Date 30 April 20x2 General Journal Accounts receivable Sales revenue Debit 708,000 708,000 30 April 20X2 59,000 Warranty expense Provision for warranty 59,000 31 December 20X2 Provision for warranty 23,600 Cash 23,600 31 December 20x2 19,700 Provision for warranty Warranty expense 19.700 30 April 20X3 Provision for warranty 13,700 Cash 13,700 30 April 20X3 2.000 Provision for warranty Warranty expense 2,000 No Credit Date 30 April 20X2 Debit 708,000 General Journal Accounts receivable Sales revenue Contract liability - warranty 627 288 80,712 31 December 20X2 23.600 Warranty expense Cash 23.600 31 December 20X2 Contract liability - warranty - 53,808 Sales revenue 53 808 30 April 20X3 13.700 Warranty expense Cash- 13.700 30 April 20X3 - 26.904 Contract liability - warranty Sales revenue 26.904 Explanation: 2. This contract now has multiple performance obligations and so the co consideration has to be allocated between the product and the warranty consideration is allocated based on relative stand-alone values as follow Product Warranty Stand-alone fair values 719,500 93,000 Percentage 88.6% 11.4% Allocation 627 288 80,712 812,500 708,000