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On September 1, 2019, Carolina Electronics Company has 1,000 Blu-ray players ready for sale. On October 1, 2019, 900 are sold at $125 each with
On September 1, 2019, Carolina Electronics Company has 1,000 Blu-ray players ready for sale. On October 1, 2019, 900 are sold at $125 each with a 1-year assurance-type warranty. Carolina estimates that the warranty cost on each Blu-ray player sold will probably average $10 per unit. During the final 3 months of 2019, Carolina incurred warranty costs of $4,000, and in 2020 warranty costs were $5,000.
Required:
1. | Prepare the journal entries for the preceding transactions. |
2. | Show how the preceding items would be reported on the December 31, 2019, balance sheet. |
3. | Prepare the journal entries for the preceding transactions using the modified cash basis method. |
4. | Next Level Which method produces the better measure of income? Why? |
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