RECOMMENDED!!Accounting for Warranties / Warranty Revenue

  

Accounting for Warranties / Warranty Revenue11. (Warranties) Sheryl Crow Equipment Company sold 500
Rollomatics during 2004 at $6,000 each. During 2004, Crow spent $20,000
servicing the 2-year warranties that accompany the Rollomatic. All applicable
transactions are on a cash basis.Instructionsa. Prepare 2004 entries for Crow using the expense warranty
approach. Assume that Crow estimates the total cost of servicing the warranties
will be $120,000 for 2 years.b. Prepare 2004 entries for Crow assuming that the
warranties are not an integral part of the sale. Assume that of the sales
total, $150,000 relates to sales of warranty contracts. Crow estimates the
total cost of servicing the warranties will be $120,000 for 2 years. Estimate revenues earned on the basis of costs
incurred and estimated costs

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