Oriole Equipment Company sells computers for $1,320 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 940 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $40 for parts and $60 for labor. (Assume sales all occur at December 31, 2020.) In 2021, Oriole incurred actual warranty costs relative to 2020 computer sales of $10,000 for parts and $15,000 for labor.

Part 1

Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2020 and 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
2020	InventoryWarranty ExpenseCash, Accrued PayrollSales RevenueWarranty LiabilityAccounts Receivable
	Warranty LiabilitySales RevenueAccounts ReceivableWarranty ExpenseInventoryCash, Accrued Payroll
	(To record sale of computers)
2020	Cash, Accrued PayrollWarranty LiabilityAccounts ReceivableInventoryWarranty ExpenseSales Revenue
	Accounts ReceivableCash, Accrued PayrollWarranty LiabilitySales RevenueInventoryWarranty Expense
	(To record liability against warranty costs)
2021	Cash, Accrued PayrollInventorySales RevenueAccounts ReceivableWarranty LiabilityWarranty Expense
	Warranty ExpenseCash, Accrued PayrollAccounts ReceivableSales RevenueWarranty LiabilityInventory
	Accounts ReceivableCash, Accrued PayrollWarranty LiabilitySales RevenueInventoryWarranty Expense

eTextbook and Media

List of Accounts

Save for Later

Attempts: 0 of 2 used

Submit Answer

Part 2