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Prepare sarasota journal entry for the recognition

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Reference no: EM133100460

Question - Sarasota Corporation sells home entertainment systems. The corporation also offers to sell its customers a two-year warranty contract as a separate service. During 2020, Sarasota sold 25,000 warranty contracts at $97 each. The corporation spent $150,000 servicing warranties during 2020, and it estimates that an additional $600,000 will be spent in the future to service the warranties. Sarasota recognizes warranty revenue based on the proportion of costs incurred out of total estimated costs.

Required - Prepare Sarasota's journal entry for the recognition of warranty revenue under the revenue approach used for service-type warranties.

Reference no: EM133100460

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