Question

Whispering Company sells televisions at an average price of $929 and also offers to each customer a separate 3-year warranty contract for $84 that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 315 televisions and 215 warranty contracts for cash. It estimates the 3-year warranty costs as $21 for parts and $41 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2017, and straight-line recognition of warranty revenues occurs.

Part 1

Record any necessary journal entries in 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

Part 2

What liability relative to these transactions would appear on the December 31, 2017, balance sheet and how would it be classified?

Whispering Company Balance Sheet (Partial) December 31, 2017
			$
			$

Part 3

In 2018, Whispering Company incurred actual costs relative to 2017 television warranty sales of $2,020 for parts and $4,040 for labor.

Record any necessary journal entries in 2018 relative to 2017 television warranties. Use "Inventory" account to record the warranty expense. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
(To record the warranty revenue earned.)
(To record the warranty expense.)

Part 4

What amounts relative to the 2017 television warranties would appear on the December 31, 2018, balance sheet and how would they be classified?

Whispering Company Balance Sheet (Partial) December 31, 2018
			$
			$

List of Accounts

Answer 1

Please comment if anyhting is needed

1

Account Titles and Explanation	Debit	Credit
Cash	$ 310,695
Revenue		$ 292,635
Unearned Warranty Revenue		$   18,060
(To record sales)

2

Current Liability
Unearned Warranty revenue	$      6,020
Long Term Liability
Unearned Warranty revenue	$   12,040

3

Account Titles and Explanation	Debit	Credit
Unearned Warranty Revenue	$      6,020
Warranty Revenue		$      6,020
(To record warranty revenue)
Warranty Expense	$      6,060
Parts Inventory		$      2,020
Salaries and Wages Payable / Accrued payroll		$      4,040

4

Current Liability
Unearned Warranty revenue	$      6,020
Long Term Liability
Unearned Warranty revenue	$      6,020