Prepare journal entry to record the sale of whatchamacallits

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Windsor Corp. manufactures a wide range of equipment. The company's biggest seller is the Whatchamacallit, which sells for $4,530 each. Starting in 2020 Whatchamacallit now carries with it a 2-year warranty against manufacturing defects. In addition to this warranty, customers can purchase an optional extended warranty for $1,630 extra that extends the Whatchamacallit's warranty an additional 2 years. From experience with similar products, Windsor Corp. has determined that each Whatchamacallit sold will average $1,010 in replacement parts (ignore labour costs for repairs). In 2020, the company sells 640 Whatchamacallits; 240 of these customers decide to purchase the optional extended warranty. Assuming the revenue is earned evenly over the two-year contract. Also in 2020, the company incurred $165,000 in total repair costs (replacement parts out of inventory).

Question 1: Prepare the journal entry to record the sale of the Whatchamacallits and the extended warranties (sales would take place throughout the year; prepare only one entry at December 31, 2020 for the total sales). Ignore any cost of goods sold entry.

Question 2: Prepare the 2020 journal entries related to the product warranties using the expense approach : to record warranty expense, to accrue warranty expense

Reference no: EM132553841

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