On January 2, 2017, Grando Company sells production equipment to Fargo Inc. for $50,000. Grando includes a 2-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on January 2, 2017. During 2017, Grando incurs costs related to warranties of $900 (Use Parts Expense account). At December 31, 2017, Grando estimates that $650 of warranty costs will be incurred in the second year of the warranty.

Date Account Titles and Explanation Debit Credit Jan. 2, 2017Cash 50000 50000 Sales Revenue During 2017 Warranty Expense 900 900 Dec. 31, 2017 | |Warranty Expense 650 WWarraniy laily 650