Question

 On January 2, 2020, Coronado Company sells production equipment to Fargo Inc, for $48,000. Coronado includes a 2-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on January 2, 2020. During 2020, Coronado incurs costs related to warranties of $900. At December 31, 2020, Coronado estimates that $620 of warranty costs will be incurred in the second year of the warranty. 

Prepare the journal entry to record this transaction on January 2, 2020, and on December 31, 2020 (assuming financial statements are prepared on December 31, 2020). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter for the amounts.) 

Repeat the requirements for (a), assuming that in addition to the assurance warranty, Coronado sold an extended warranty (service-type warranty) for an additional 2 years (2022-2023) for $780. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter o for the amounts.)

Answer 1

1.

Date	General journal	Debit	Credit
Jan 2, 2020	Cash	$48,000
	To Sales revenue		$48,000
During 2020	Warranty expense	$900
	To Parts expenses		$900
Dec 31, 2020	Warranty expense	$620
	To Warranty Liability		$620

2.

Date	General journal	Debit	Credit
Jan 2, 2020	Cash	$48,780
	To Sales revenue		$48,000
	To unearned warranty revenue		$780
During 2020	Warranty expenses	$900
	To Parts expenses		$900
Dec 31, 2020	Warranty expenses	$620
	To Warranty liabilities		$620