Reference no: EM132596116

Question - Crane Company sells televisions at an average price of $965 and also offers to each customer a separate 3-year warranty contract for $96 that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 303 televisions and 273 warranty contracts for cash. It estimates the 3-year warranty costs as $19 for parts and $29 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2017, and straight-line recognition of warranty revenues occurs.

Part 1 - Record any necessary journal entries in 2017.

Part 2 - What liability relative to these transactions would appear on the December 31, 2017, balance sheet and how would it be classified?

Part 3 - In 2018, Crane Company incurred actual costs relative to 2017 television warranty sales of $1,820 for parts and $4,090 for labor.

Record any necessary journal entries in 2018 relative to 2017 television warranties. Use "Inventory" account to record the warranty expense.

Part 4 - What amounts relative to the 2017 television warranties would appear on the December 31, 2018, balance sheet and how would they be classified?