Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Solutions provided in red colour please show me the breakdown of where the numbers are being pulled from. Newman Tools sells an electrical law mower
Solutions provided in red colour please show me the breakdown of where the numbers are being pulled from.
Newman Tools sells an electrical law mower and offers a two-year warranty to its customers. Newman uses the service-type approach for the warranty. 810 units of the law mower were sold in 2018 at an average price of $600 per unit. The portion of sales revenues allocated to the warranty portion of the sale was $110 per unit. The company estimated that warranty costs would average $95 per lawn mower over two years. Actual costs incurred by Newman to honour warranty claims in 2018 totalled $19,200 ( $16,000 for labor, $3,000 for parts and the rest cash). Warranty revenues are recognized in each year based on the proportion of costs incurred out of the total estimated costs. a. Prepare journal entries to record all the transactions described above in 2018. (13 marks) b. Assume Newman accounts for the warranty using the assurance-type approach. Prepare journal entries to record all the transactions described above in 2018. (12 marks)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started