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 PAGE 19 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

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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

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.

PAGE 19

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