The company estimates, based upon its experience from prior years, the total warranty costs for the

standard warranty to average $$100$ per screen, being $$60$ for parts and $$40$ for labor. It also expects the

average three$-$year extended warranty costs to be different. Costs for the three$-$year extended warranties

were expected to be $$80$ for parts and $$160$ for labor for each warranty contract. It further assumes that

the warranty costs for the extended warranty contracts will be incurred as follows: $20\%$ in $2022,50\%$ in

$2023$ and the balance in $2024.$ And finally, SS expects to recognize warranty revenues based on the

proportion of warranty costs incurred out of the total estimated costs.

During $2021,$ the company sold $1,200$ screens and $1,080$ extended warranty contracts for cash. During

the year, it incurred some actual costs associated with the standard warranties related to the $2021$ sales

of screens. The cost for parts were $150\%$ of the labor costs. On December $31,2021,$ SS reported the

following:

Current Liabilities:

Estimated Liability Under Warranty

$$61\mathrm{.}200$

Unearned Warranty Revenue

$$302\mathrm{.}400$

SS incurred actual costs, associated with the standard warranties related to the $2021$ sales of screens, in

These amounted to $$70,800$ out of which, overhead costs amounted to $$23,600.$ It further incurred

actual costs associated with the extended warranty contracts which were consistent with what the

company had expected to incur as stated above.

Required:

Determine the selling price for each extended warranty contract.

Present all journal entries to be prepared, in proper format, in $2021$ in order to record all of the

warranty related transactions and adjustments for $2021.$

Present all journal entries to be prepared, in proper format, in $2022$ in order to record all of the

transactions related to the standard warranties of $2021.$

Present all journal entries to be prepared, in proper format, in $2022$ in order to record all of the

transactions related to the extended warranties of $2021.$

What liabilities related to warranties, would be reported on the December $31,2022$ Balance Sheet.

Show how these would be classified.