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P13-7B (L04,5) (Warranties, Accrual, w Treanor Company sells a machine for $12,200 under a 12-month war- ranty agreement that requires the company to replace all
P13-7B (L04,5) (Warranties, Accrual, w Treanor Company sells a machine for $12,200 under a 12-month war- ranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the custom- ers. With sales being made evenly throughout the year, the company sells 240 machines in 2017 (warranty expense is incurred half in 2017 and half in 2018). As a result of product testing, the company estimates that the warranty cost is $635 per machine ($260 parts and $375 labor). Instructions Assuming that actual warranty costs are incurred exactly as estimated, what journal entries would be made relative to the fol- lowing facts? (a) Under application of the expense warranty accrual method for (1) Sale of machinery in 2017. (2) Warranty costs incurred in 2017. (3) Warranty expense charged against 2017 revenues. (4) Warranty costs incurred in 2018
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