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Prepare the entries to reflect the given transactions

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Question: Giant Cycling Company sells bicycles for Rs.150,000 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2018, the company sold 700 bicycles. Based on past experience, the company has estimated the total 2-year warranty costs as Rs. 300 for parts and Rs. 600 for labor. (Assume sales all occur at December 31, 2018.)

In 2019, Giant incurred actual warranty costs relative to 2018 computer sales of Rs. 100,000 for parts and Rs. 180,000 for labor.

Instructions: (a) Under an assurance-type warranty, prepare the entries to reflect the above transactions (accrual method) for 2018 and 2019.

(b) The transactions of part (a) create what balance under current liabilities in the 2018 statement of financial position?

Reference no: EM132756165

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