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Nana Ltd. sells electronics. To ensure customers of their product quality, every computers sold is warranted for 2-year. In the first two years, the company
Nana Ltd. sells electronics. To ensure customers of their product quality, every computers sold is warranted for 2-year. In the first two years, the company is required to replace defective parts and to provide the necessary repair labor. During 2019, Nana sells for cash 400 computers at a unit price of $2,400. On the basis of past experience, the 2-year warranty costs are estimated to be $155 for parts and $185 for labor per unit. (For simplicity, assume that all sales occurred on December 31, 2019.) The warranty is not sold separately from the computer. In 2019, cost incurred to Nana were $15,500 for parts and $21,850 for labor. Instructions a. Record any necessary journal entries in 2019. Ignore COGS of the computers. b. In 2020, the actual warranty costs to Nana were $21,400 for parts and $39,900 for labor. Record any necessary journal entries in 2020. c. How is the warranty liability classified in the 2019 Statement of Financial Position
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