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In: Accounting

On December 31, 2019, Resilient Company sells production equipment to Ready Corp. for $160,000. Resilient includes...

On December 31, 2019, Resilient Company sells production equipment to Ready Corp. for $160,000. Resilient includes a one-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2019. Resilient estimates the prices to be $156,000 for the equipment and $4,000 for the cost of the warranty.

Required:

  1. Prepare the journal entry to record this transaction on December 31, 2019.
  2. Repeat the requirements for (a) assuming that, in addition to the assurance warranty, Resilient sold an extended warranty (service type warranty) for an additional two year (2019 – 2020) for $1,600.

Solutions

Expert Solution

Answer
Journal Entry
a)
Date Account titles and explanation Debit Credit
01-12-2019 Cash   $   1,60,000
Warranty Expense $        4,000
To, sales revenue $   1,60,000
To, Provision for Warranties $        4,000
(To Record amount received on sale of production equipment with 1-year assurance warranty service)
b) Record transaction in addition to the assurance warranty
Cash   (160,000+1600) $   1,61,600
Warranty Expense (4000+1600) $        5,600
To, sales revenue $   1,61,600
To, Provision for Warranties $        5,600
(To Record transaction in addition to the assurance warranty)

ekkarill92 answered 2 years ago
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