Reference no: EM133095895

Question - Sentinel Ltd. sells televisions for $2,000 each, which includes a 2-year assurance-type warranty that requires the company to perform periodic services and to replace defective parts. During Year 6, Sentinel sold 300 televisions for cash. Based on experience, the company has estimated the total 2-year warranty costs to be $70 per television. (Assume sales all occur on December 31, Year 6.) In Year 7, Sentinel Company incurred actual warranty costs relative to Year 6 television sales of $22,000 (the assurance warranty).

Sentinel also sells a five-year extended warranty for $300. Warranty expenditures are assumed to be zero in the first two years (since the assurance-type warranty covers these repairs) and then evenly over the final three years.

Of the 800 televisions sold in Year 6, half the customers purchased the extended warranty. During Year 9, Sentinel incurred $31,000 in warranty costs related to the Year 6 television sales and the extended warranty. Sentinel Ltd. follows IFRS.

Required -

1. Prepare the entries for the sale of the televisions, including both warranties.

2. Prepare the entry for Year 7 warranty costs. Use a date of May 30.

3. Prepare the Year 9 entry for the warranty costs (use a date of May 30) and the December 31, Year 9 adjusting entry for the extended warranty.