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On August 1, 2016, Pereira Corporation has sold, on account, 1,700 Wiglows to Mendez Company at $480 each. Mendez also purchased a 1-year service-type warranty

On August 1, 2016, Pereira Corporation has sold, on account, 1,700 Wiglows to Mendez Company at $480 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 $9,000. Costs for 2017 were $8,400.

Required:

1. Prepare the journal entries for the preceding transactions.
2. 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 ExpensePrepare 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

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

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