On August 1, 2016, Pereira Corporation has sold, on account, 1,600 Wiglows to Me
ID: 2407926 • Letter: O
Question
On August 1, 2016, Pereira Corporation has sold, on account, 1,600 Wiglows to Mendez Company at $450 each. Mendez also purchased a 1-year service-type warranty on all the Wiglows for $12 per unit. In 2016, Pereira incurred warranty costs of $9,200. Costs for 2017 were $7,000.
Required:
Prepare the necessary journal entries to record:
5. the warranty revenue earned in 2017
1. the sale of Wiglows and service warranty on account on August 1, 2016 2. the warranty costs paid during 2016 3. the warranty revenue earned in 2016 4. the warranty costs paid during 20175. the warranty revenue earned in 2017
Show how Pereira would report the items on the December 31, 2016, balance sheet.Explanation / Answer
Date General Journal Debit Credit 1 Aug. 1, 2016 Cash 739200 Sales revenue (1600 x $450) 720000 Unearned warranty revenue (1600 x $12) 19200 (To record sale of Wiglows and service warranty) 2 2016 Warranty expense 9200 Cash 9200 (To record warranty costs paid) 3 Dec. 31, 2016 Unearned warranty revenue 8000 Warranty revenue ($19200 x 5/12) 8000 (To record warranty revenue earned) 4 2017 Warranty expense 7000 Cash 7000 (To record warranty costs paid) 5 Dec. 31, 2017 Unearned warranty revenue 11200 Warranty revenue ($19200 x 7/12) 11200 (To record warranty revenue earned) Pereira Corporation Balance Sheet (Partial) December 31, 2016 Current liabilities Unearned warranty revenue 11200
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