Riverbed Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2017, the corporation sells for cash 371 computers at a unit price of $2,750. On the basis of past experience, the 2-year warranty costs are estimated to be $168 for parts and $208 for labor per unit. (For simplicity, assume that all sales occurred on December 31, 2017.) The warranty is not sold separately from the computer.

Account Debit Credit

1. Cash 1020250 (Correct)

2. Sales Rev. (Incorrect) 1020250 (Incorrect)

3. Warranty Exp. 139496 (Incorrect) (Incorrect)

4. Warranty Liability (Incorrect) 139496 (Correct)