Early in 2017 Ayayai Equipment Company sold 600 Rollomatics

Early in 2017, Ayayai Equipment Company sold 600 Rollomatics during 2017 at $5,800 each. During 2017, Ayayai spent $21,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.

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Account Titles and Explanation

Debit

Credit

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Date

Account Titles and Explanation

Debit

Credit

(To record warranty revenue)

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Early in 2017, Ayayai Equipment Company sold 600 Rollomatics during 2017 at $5,800 each. During 2017, Ayayai spent $21,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.

Solution

Date Account Title and Explaination Debit Credit At sales During 2017, Dec. 31, 2017 Cash $ 34,80,000 Sales Revenue $ 34,80,000 (Being sales recorded 600 X $5,800 = $34,80,000) At sales During 2017, Dec. 31, 2017 Warranty Expense $       21,000 Cash $       21,000 (Being amount spent on servicing recorded) At sales During 2017, Dec. 31, 2017 Warranty Expense $       36,000 Estimated Liabilities Warranties $       36,000 (Being remaining warranty expense estimated $57,000 - $21,000 = $36,000) Date Account Title and Explaination Debit Credit At sales During 2017, Dec. 31, 2017 Cash $ 34,80,000 Sales Revenue $ 34,22,000 Unearned warranty Revenue $       58,000 (Being sales recorded 600 X $5,800 =34,80,000) At sales During 2017, Dec. 31, 2017 Warranty Expense $       21,000 Cash $       21,000 (Being amount spent on servicing recorded) At sales During 2017, Dec. 31, 2017 Unearned warranty Revenue $       21,368 Warranty Revenue $       21,368 (Being warranty revenue recorded) [($21,000 / $57,000) * $58,000]