1. Warranties

Aylmer uses the service-type warranty (revenue-based approach) to account for any necessary adjustments to warranty related items. Entries for Y4 and Y5 have been made in the appropriate years. No adjusting entry for total unearned warranties earned during Y6 has been made.

In the Excel spreadsheet, see the tab labelled Warranties to make any calculations for an adjusting journal entry.

Sales relating to warranties

Unearned

Year

Sales

Warranty

Comments

Y4

3,225,600

366,500

It is estimated that the 3-year warranty will be earned 25% in the first year, 35% in the second year and 40% in the third year

Y5

3,798,600

402,300

It is estimated that the 3-year warranty will be earned 25% in the first year, 35% in the second year and 40% in the third year

Y6

4,301,500

-

It is estimated that the 3-year warranty will be earned 25% in the first year, 35% in the second year and 40% in the third year

Use the space below to make any calculations

Make any required calculations and prepare journal entries