Question
In: Accounting
Boston Automotive Company sold a car for a total price of $28,300 at the beginning of...
Boston Automotive Company sold a car for a total price of $28,300 at the beginning of January 2017 (1/1/17) which included both the manufacturer’s 2-year, 20,000 mile warranty and an extended warranty for an additional 3 years and 30,000 miles. The extended warranty was $1,900 of the total price. Boston Automotive records revenue under its extended warranties using the straight line method. Boston Automotive has estimated the manufacturer’s 2-year warranty will cause the company to incur costs of $1,000 over the course of the two years. In 2017, Boston Automotive incurred actual warranty costs relative to the car of $200 for parts it had in inventory and $450 paid to its mechanics for labor.
Required:
Record all entries required in 2017 related to the sale of the car and the warranties.
What years would Boston Automotive recognize revenue under the extended warranty?
Prepare the journal entry Boston Automotive would prepare in those years for the extended warranty.
Solutions
Expert Solution
Hence
Net Sales Revenue under warranty method $25,400/-
Provision for First Two year Warranty $1,000/-
Additional Warranty Sales Revenue $1,900/-
ekkarill92 answered 1 year agoRelated Solutions
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