Problem 13-6

Vaughn Company sells televisions at an average price of $836 and also offers to each customer a separate 3-year warranty contract for $90 that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 321 televisions and 221 warranty contracts for cash. It estimates the 3-year warranty costs as $21 for parts and $41 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2017, and straight-line recognition of warranty revenues occurs.

a. Record any necessary journal entries in 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

b. What liability relative to these transactions would appear on the December 31, 2017, balance sheet and how would it be classified?

c.In 2018, Vaughn Company incurred actual costs relative to 2017 television warranty sales of $2,200 for parts and $4,150 for labor. Record any necessary journal entries in 2018 relative to 2017 television warranties. Use "Inventory" account to record the warranty expense. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

d. What amounts relative to the 2017 television warranties would appear on the December 31, 2018, balance sheet and how would they be classified?