Wright Machinery Corporation manufactures automobile engines for major automobile producers. The engines sell for $920 per engine. In addition, customers have the option to purchase a service-type warranty for $73 per engine that protects against any defects for a period of 5 years. During 2016, Wright sold 8,000 engines to National Motors. National Motors purchased warranties on all of the engines purchased. During 2016, Wright repaired defective motors at a cost of $94,400.

Prepare the necessary journal entries to record:

	1. the sale of engines and service warranty on account during 2016 (one entry).
	2. the warranty costs paid during 2016
	3. the warranty revenue earned in 2016.
	Additional Instructions Model your entries after the Service-Type Warranties example in your textbook. For grading purposes, use December 31 to record a summary transaction for entries that would have been made during the year.

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GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7

CHART OF ACCOUNTS

Wright Machinery Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
230	Unearned Warranty Revenue
231	Salaries Payable
240	Estimated Warranty Liability
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
438	Warranty Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
551	Warranty Expense
559	Miscellaneous Expenses
910	Income Tax Expens