Selzer Equipment Company sold 610 Rollomatics during 2012 at $6,580 each. During 2012, Selzer spent $25,950 servicing the 2-year warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.

(a) Prepare 2012 entries for Selzer using the expense warranty approach. Assume that Selzer estimates the total cost of servicing the warranties will be $173,000 for 2 years. Use "Inventory" account to record the warranty expense. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.

Account Titles and Explanation

Debit

Credit

1. (To record the sale)

2 (To record the warranty expense)

3.(To record the warranty liabilitiy)

(b) Prepare 2012 entries for Selzer assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $162,800 relates to sales of warranty contracts. Selzer estimates the total cost of servicing the warranties will be $173,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs. Use "Inventory" account to record the warranty expense. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.

Account Titles and Explanation

Debit

Credit

1. (To record the sale)

2. (To record the warranty expense)

3. (To record the estimated revenues)