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What is LaTrez expected income before taxes

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Question - LaTrez manufactures and sells direct to consumer expresso machines. The machines come with a one year warrantly and are sold for $1,500 each. LaTrez also sells 3 year extended warranties for $300 per machine. In 2020, La Trez sold 12,000 expresso machines and 4,000 extended warranties. LaTrez expects warranty repair costs for the espresso machines to be 3% in 2021, 1% in year 2022, 3% in year 2023, and 4% in year 2024. Assume all of the expresso machines and extended warranties were sold on December 31, 2020.

a. What journal entry(ies) does LaTrez record on December 31, 2020 related to these transactions?

b. What is LaTrez's expected income before taxes from these transactions in 2024?

Reference no: EM132846523

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