Reference no: EM132928690

Problem - The Optimum company sells appliances that come with a warranty. Total sales in 2021 amount to $4,500,000 on credit. The estimated cost of the warranty included in the selling price of the appliances is 1% of sales in 2022 and 3% in 2023. Actual warranty costs related to products sold in previous years amount to $190,000 in 2021. The company also sells extended warranties that cover years 2 and 3 after the sale. In 2021, total extended warranty sales amounted to $230,000 paid for in cash. The actual costs related to extended warranties in 2021 were $170,000. Required For the warranty included in the selling price:

1- Record all journal entries related to this warranty in 2021.

2- Assuming beginning Warranty Liability was $250,000, calculate the ending Warranty liability in 2021. For the extended warranty sold separately:

3- Assume the "Unearned warranty revenues" account had a beginning balance of $180,000 in 2021, and that the Optimum company estimates that it earned 60% of the total unearned warranty sales recorded by the end of 2021. Record all the journal entries related to the extended warranties and calculate the ending balance in the "Unearned warranty revenues" account in 2021.