Question
You purchase an automobile from Fast Auto for 45,000 on January 5, 2022. Fast Auto estimates the assurance-type warranty costs on the automobile to be
You purchase an automobile from Fast Auto for 45,000 on January 5, 2022. Fast Auto estimates the assurance-type warranty costs on the automobile to be 900 (Fast Auto will pay for repairs for the first 36,000 kilometers or 3 years, whichever comes first). You also purchase for 1,200 a service-type warranty for an additional 3 years or 36,000 kilometers. Fast Auto incurs warranty costs related to the assurance-type warranty of 400 in 2022 and 250 in 2023 and 2024. Fast Auto records revenue on the service-type warranty on a straight-line basis. What entries should Fast Auto make in 2022 and 2025?
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