On August 1, 2016, Pereira Corporation has sold, on account, 1,600 Wiglows to Mendez Company at $450 each. Mendez also purchased a 1-year service-type warranty on all the Wiglows for $12 per unit. In 2016, Pereira incurred warranty costs of $9,200. Costs for 2017 were $7,000.

Required:

1.	Prepare the journal entries for the preceding transactions.
2.	Show how Pereira would report the items on the December 31, 2016, balance sheet.

CHART OF ACCOUNTS

Pereira Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
230	Unearned Warranty Revenue
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
438	Warranty Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
551	Warranty Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Prepare the necessary journal entries to record:

	1. the sale of Wiglows and service warranty on account on August 1, 2016
	2. the warranty costs paid during 2016
	3. the warranty revenue earned in 2016
	4. the warranty costs paid during 2017
	5. the warranty revenue earned in 2017
	Additional Instructions

PAGE 9

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11

Show how Pereira would report the items on the December 31, 2016, balance sheet. Additional Instructions

Pereira Corporation

Partial Balance Statement

December 31, 2016

1	Current Liabilities:
2