TurfMasters sells a Toro lawn mower for $ 3,000 each, which includes a 2-year warranty that requires the company to perform periodic services and to replace defective parts. You estimate the warranties to be worth 20% of the sales price. During 2022, TurfMasters sold 400 lawn mowers on account. Based on past experience, the company has estimated the total 2-year warranty costs at $ 80 for parts and $ 100 for labour per mower. (Assume sales all occur at December 31, 2022.)

In 2023, TurfMasters incurred actual warranty costs relative to 2022 lawn mower sales of $ 6,000 for parts and $ 8,500 for labour.

Instructions

1. Using the expense based warranty approach, prepare the entries to reflect the above transactions for 2022 and 2023.
2. Using the revenue warranty approach, prepare the entries to reflect the above transactions for 2022 and 2023