Landcaster Inc. sells its products with a two-year service type warranty. On January 1, year one, Lancaster South 60 machines for $2500 each, on account Lancaster determines that the machines normally sell for $2275 each and the service type warranty could be purchased for $225 per machine. In year one, Lancaster pays $5000 for warrantee costs.

Required

Prepare Lancaster’s journal entry is related to the sales and warrantee in year one.

Prepare the necessary journal entries to record:

1. The sale of 60 machines on account on January 1

2. The warranty costs paid during that year

3. The warranty revenue earned in year one