(Answered) 1 warranties selzer equipment company sold 500 rollomatics

Accounting

1. Warranties Selzer Equipment Company sold 500 Rollomatics during 2010 at $6,000 each. During 2010, Selzer spent $30,000 servicing the 2-year warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.

(a) Prepare 2010 entries for Selzer using the expense warranty approach. Assume that Selzer estimates the total cost of servicing the warranties will be $120,000 for 2 years.

(b) Prepare 2010 entries for Selzer assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $160,000 relates to sales of warranty contracts. Selzer estimates the total cost of servicing the warranties will be $120,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs.

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