Exercise 18-26 On anuary 2, 2017, Toal Company salls prodution ecuipment to Farg
ID: 2538570 • Letter: E
Question
Exercise 18-26 On anuary 2, 2017, Toal Company salls prodution ecuipment to Farga Inc. for $55,on. Toal indudes a 2-yaar assurance warranty servica with the sale of all its equiament. Tha customer receves and pays for the aquipmant on January 2, 2017. During 2017, Teal nours costs ited to warrant es of $94 ) Use Parts Expense account). At December 31, 2d 17, Tcai estimates that $64D of warranty casts wil be incumed in the second Year at the warra Prepare the journal entry to recort this trensaction on January 2, 2017, and on December 31, 2017 (asauming financial statements are prepared an December 31, 2017). (Credit account titles are automaticaly 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 t required, select "No en the amounts) Date Account Titles and Explanation Debit Credit Repeat the equirements ro a assuming that i addition to the assurance wa ant Teal sold an extended e anc service type amer ty entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) for an additional 2 years 2019 2020 ror82 (Credit account titles areau tom at any indented when the amount Account Titles and Explanation Question Attempts: O of 3 used SAVE FOR LATERExplanation / Answer
Jan 2nd, 2017
1) Fargo Inc. Debit. $55,000
To Sales Credit. $55,000
(Being sale made to Fargo Inc.)
2) Bank Account Debit. $55,000
To Fargo Inc. Credit $55,000
(Being dues settled by Fargo Inc.)
31st Dec'17
Assumption: $940 incurred on 31st December, 2017
1) Parts Expense Account Debit. $940
To Bank Account Credit. $940
(Being cost incurred towards warranty replacement)
2) Parts expense account Debit. $640
To provision for warranty Credit. $640
(Being provision for warranty created against anticipated future liability based on best estimates)
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