Dos Passos Company sells televisions at an average price of $948 and also offers
ID: 2495420 • Letter: D
Question
Dos Passos Company sells televisions at an average price of $948 and also offers to each customer a separate 3-year warranty contract for $126 that requires the company to perform periodic services and to replace defective parts. During 2014, the company sold 378 televisions and 348 warranty contracts for cash. It estimates the 3-year warranty costs as $23 for parts and $33 for labor and accounts for warranties separately. Assume sales occurred on December 31, 2014, and straight-line recognition of warranty revenues occurs.
Record any necessary journal entries in 2014.
Explanation / Answer
Journal Entries:
Date
Accounts / Explanation
Debit
Credit
Dec. 31, 2014
Cash (358344 + 43848)
$ 402,192
Sales Revenue (378 * 948)
$ 358,344
Deferred Extended Warranties (348 *126)
$ 43,848
(Being units and warranty sold)
Dec. 31, 2014
Deferred Extended Warranties
$ 14,616
Extended Warranty Revenues (43848 /3)
$ 14,616
(Being Warranty Revenue recognized)
Journal Entries:
Date
Accounts / Explanation
Debit
Credit
Dec. 31, 2014
Cash (358344 + 43848)
$ 402,192
Sales Revenue (378 * 948)
$ 358,344
Deferred Extended Warranties (348 *126)
$ 43,848
(Being units and warranty sold)
Dec. 31, 2014
Deferred Extended Warranties
$ 14,616
Extended Warranty Revenues (43848 /3)
$ 14,616
(Being Warranty Revenue recognized)
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