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Dells company sells computers for 1500 each and also gives cash customer a 2 year warranty that requires the company to perform periodic service and to replace defective parts. during 2008 the company sold 700 computers. based on past experience the company has estimated the total 2 year warranty costs as 30 for parts and 60 for labor. assume sales all occur at Dec 31 2008.

In 2009 dells incurred actual warranty costs relative to 2008 computer sales of 100000 for parts and 180000 for labor.

a- Under the expenses warranty treatment give the entries to reflect the above transactions (accrual method) for 2008 and 2009.

b -Under the cash basis method what are the warranty expenses for 2008 and 2009.

c- The transactions of parts (a) create what balance under current liabilities in the 2008 balance sheet ?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M982271

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