Nash Inc. manufactures and sells computers that include an assurance-type warran

Question

Nash Inc. manufactures and sells computers that include an assurance-type warranty for the first 90 days. Nash offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance-type warranty. Because the optional extended coverage plan is sold separately, Nash determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,540 on October 1, 2017, and Nash determines the standalone selling price of each is $3,160 and $380, respectively. Further, Nash estimates, based on historical experience, it will incur $220 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,570. Assume that the $220 in costs to repair defects in the computers occurred on October 25, 2017. (a) Prepare the journal entry(ies) to record the October transactions related to sale of the computers. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit (To record sales) (To record cost of goods sold) (To record warranty expense)

Explanation / Answer

on 1st oct

1. debtor ac dr 3540

to sale ac 3540

(being sale made with the 90days warranty)

on 1st oct

2. warranty exp ac dr 220

warranty laibility 220

on 25 oct

Warranty laibility ac dr 220

to bank 220

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