Question

Question 5.4                                                                                (Total: 14 marks; 2 marks per line)

Frigid Temperatures Inc. has sold 1,000 refrigerators during 2020 at a total price of $ 1,620,000, with a warranty guarantee that the product was free from any defects. The cost of the refrigeratetors sold was $1,080,000. The warranty covers one year, with an estimated cost of $ 10,000. In addition, Frigid Temperatures Inc. sold extended warranties on 600 refrigerators for four years beyond the one-year period for $ 210,000.

Required

1.      Prepare the journal entries to record the sale and related warranties for 2020.

Answer 1

SOLUTION:
Trnsaction	Journal Entries	Amount	Amount
1	Cash	$            1,620,000
	Sales Revenue		$               1,620,000
	(To Record the Sales Revenue of the year)
2	Cost of Goods Sol	$            1,080,000
	Inventory		$               1,080,000
	(To Record the cost of Goods Sold)
3	Warranty Expenses	$                  10,000
	Estimated Warranty Payable		$                     10,000
	(To Record the warranty Expenses of the period)
4	Cash	$                210,000
	Warranty Sales Revenue		$                  210,000
	(To Record the consumption of warranty)