Question

Pharoah Company sells televisions at an average price of $925 and also offers to each customer a separate 3-year warranty contract for $93 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 288 televisions and 248 warranty contracts for cash. It estimates the 3-year warranty costs as $21 for parts and $41 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty revenues occurs. Part 1 Record any necessary journal entries in 2020. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Answer 1

1)
Account Titles and Explanation	Debit (in $ )	Credit (in $ )
Cash	$ 289,464
Sales Revenue           ( 288 televisions x $ 925 )		$ 266,400
Unearned Sales Warranty             ( 248 x $ 93 )		$ 23,064
(To record the Sale)
2)
Pharoah Company Balance Sheet (Partial) December 31, 2020
Current Liabilities:
- Unearned Sales Warranty                  ( $ 23,064 / 3 )	$ 7,688
Long -term Liabilities:
- Unearned Sales Warranty	$ 15,376
3)
Account Titles and Explanation	Debit (in $ )	Credit (in $ )
Unearned Sales Warranty	$ 7,688
Sales Warranty (or) Warranty Revenue		$ 7,688
(To record the Warranty Revenue)
Warranty Expense	$ 5,850
Parts Inventory		$ 2,130
Accrued Payroll		$ 3,720
(To record the Warranty Expense)
4)
Pharoah Company Balance Sheet (Partial) December 31, 2021
Current Liabilities:
- Unearned Sales Warranty                  ( $ 23,064 / 3 )	$ 7,688
Long -term Liabilities:
- Unearned Sales Warranty	$ 7,688