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noki Problem 4-Warranties [20 minutes] 9 marks In 2017, Junk and Disorderly (a second-hand sports equipment store) sold 5,000 mountain bikes. Junk and Disorderly

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noki Problem 4-Warranties [20 minutes] 9 marks In 2017, Junk and Disorderly (a second-hand sports equipment store) sold 5,000 mountain bikes. Junk and Disorderly offered an in-store, no-charge, two-year warranty on each bike sold. Company management estimates that the average cost of providing the warranty is $8 per unit in the first year of coverage and $11 per unit in the second year. Junk and Disorderly's warranty-related expenditures totaled $36,500 for labor costs during 2017. a. Prepare the journal entry to recognize Junk and Disorderly's warranty expense in 2017 (3 marks). DR. CR. Debit Credit b. Prepare the journal entry to recognize the warranty service provided in 2017 (3 marks). DR. CR. Debit Credit c. Determine the total provision for warranty obligations that will be reported on the company's balance sheet at year-end. Assuming that all sales transactions and warranty service took place on the last day of the year, how much of the warranty obligation will be classified as a current liability? As a non- current liability? (3 marks). Total Provision for Warranty Obligations on Balance Sheet Current Liability, Non-Current Liability

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