Recording and Reporting Warranties During 2020, Ward Company introduced a new product carrying a three-year warranty against defects, which has a separate purchase price. The company collected $20,000, and $35,000 for this extended warranty feature in the years 2020 and 2021, respectively. The company uses straight-line recognition of warranty revenue. The estimated warranty costs are 2% of sales within the first 12 months following the sale and 44 in the second 12 months following the sale. For simplification, assume that sales occurred at the first of the year. Sales and actual warranty expenditures for the years ended December 31, 2020 and 2021 are: Actual Warranty Sales Expenditures 2020 $600.000 50.000 2021 1.000.000 30.000 51.000.000 539.000 a. Record the journal entries required for (1) the sale of the products and warranties on credit, (2) incurred warranty costs, and (3) recognition of warranty revenue for 2020 and 2021, Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answers to the nearest whole dollar. a. Date Account Name Dr. Cr. 1. 2020 To record sale of products and warranties 2. 2020 To record incurred warranty costs 3. 2020 . To recognize warranty revenue 1. 2021 + To record sale of products and warranties 2. 2021 . To record sale of products and warranties 3. 2021 To recognize warranty revenue b. What liability would be reported on the balance sheet at the end of 2020 and 2021? b. 2020 2021 Balance Sheet, Dec. 31 Current liabilities $ $ E pepe cen Cash and Payables Accounts Receivable Der Inventory Equipment Copyright Accounts Payable Accrued Compensation Deferred Revenue Estimated Litigation Liability Interest Payable Salaries Payable Sales Taxes Payable Warranty Liability Note Payable Discount on Note Payable Asset Retirement Obligation Sales Revenue Gift Card Breakage Revenue Warranty Revenue rep cen Deferred Revenue Estimated Litigation Liability Interest Payable en Salaries Payable Sales Taxes Payable Warranty Liability Note Payable Discount on Note Payable Asset Retirement Obligation Sales Revenue Gift Card Breakage Revenue Warranty Revenue Cost of Goods Sold Interest Expense Legal Expense Salaries Expense Warranty Expense Gain on Litigation Settlement Loss on Litigation Settlement N/A Recording and Reporting Warranties During 2020, Ward Company introduced a new product carrying a three-year warranty against defects, which has a separate purchase price. The company collected $20,000, and $35,000 for this extended warranty feature in the years 2020 and 2021, respectively. The company uses straight-line recognition of warranty revenue. The estimated warranty costs are 2% of sales within the first 12 months following the sale and 44 in the second 12 months following the sale. For simplification, assume that sales occurred at the first of the year. Sales and actual warranty expenditures for the years ended December 31, 2020 and 2021 are: Actual Warranty Sales Expenditures 2020 $600.000 50.000 2021 1.000.000 30.000 51.000.000 539.000 a. Record the journal entries required for (1) the sale of the products and warranties on credit, (2) incurred warranty costs, and (3) recognition of warranty revenue for 2020 and 2021, Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answers to the nearest whole dollar. a. Date Account Name Dr. Cr. 1. 2020 To record sale of products and warranties 2. 2020 To record incurred warranty costs 3. 2020 . To recognize warranty revenue 1. 2021 + To record sale of products and warranties 2. 2021 . To record sale of products and warranties 3. 2021 To recognize warranty revenue b. What liability would be reported on the balance sheet at the end of 2020 and 2021? b. 2020 2021 Balance Sheet, Dec. 31 Current liabilities $ $ E pepe cen Cash and Payables Accounts Receivable Der Inventory Equipment Copyright Accounts Payable Accrued Compensation Deferred Revenue Estimated Litigation Liability Interest Payable Salaries Payable Sales Taxes Payable Warranty Liability Note Payable Discount on Note Payable Asset Retirement Obligation Sales Revenue Gift Card Breakage Revenue Warranty Revenue rep cen Deferred Revenue Estimated Litigation Liability Interest Payable en Salaries Payable Sales Taxes Payable Warranty Liability Note Payable Discount on Note Payable Asset Retirement Obligation Sales Revenue Gift Card Breakage Revenue Warranty Revenue Cost of Goods Sold Interest Expense Legal Expense Salaries Expense Warranty Expense Gain on Litigation Settlement Loss on Litigation Settlement N/A
