John Electronics, Inc. manufactures and distributes LCD televisions. Every television manufactured by John carries an assurance-type warranty covering all parts and labor to protect against defects for a 2-year period. During the current year, John's sales amounted to $10,007,000. John estimates that the total costs of providing the assurance-type warranty will be 3% of sales. Actual repair costs for the first year after the sale were $222,000 with $152,500 for parts and $69,500 for labor (paid). During the second year, the company incurred $232,500 in total repairs with $152,000 for parts and S80,500 for labor (paid). Read the requirements Requirement a. Prepare the journal entries for each year under the warranty assuming that John uses the cash basis. (Record debits first, then credits. Exclude explanations from any journal entries. If no entry is required select "No Entry Required" on the first line of the journal entry table and leave all remaining cells in the table blank.) First, record the journal entry under the warranty in the year of the sale when John uses the cash basis. Do not record the entry for actual repairs. We will do that in the next step. Account Year of the Sale Now joumalize the actual repairs in the first year after the sale. Do not record the entry for actual repairs in the second year after the sale. We will do that in the next step. Account First Year after the Sale Next, record the journal entry for actual repairs in the second year after the sale. Account Second Year after the Sale Requirement b. Independent of your answer to part (a), prepare the journal entries required to record the events related to the warranty using the accrual basis. (Record debits first , then credits. Exclude explanations from any journal entries. If no entry is required select "No Entry Required" on the first line of the journal entry table and leave all remaining cells in the table blank.) First, record the journal entry in the year of the sale when John uses the accrual basis. Do not record the entry for actual repairs. We will do that in the next step. Account Year of the Sale Requirement b. Independent of your answer to part (a), prepare the journal entries required to record the events related to the warranty using the accrual basis. (Record debits first, then credits. Exclude explanations from any journal entries. If no entry is required select "No Entry Required" on the first line of the journal entry table and leave all remaining cells in the table blank.) First, record the journal entry in the year of the sale when John uses the accrual basis. Do not record the entry for actual repairs. We will do that in the next step. Account Year of the Sale Now, record the journal entry for actual repairs in the first year after the sale. Do not record the entry for actual repairs in the second year after the sale. We will do that in the next step Account First Year after the Sale Finally, record the journal entry for actual repairs in the second year after the sale. Account Second Year after the Sale
