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What journal entries would be made relative to the facts

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Reference no: EM132527822

Question - Red Company sells a machine for €685 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. The company sells 710 machines in 2019 (warranty expense is incurred quarter in 2019 and three quarters in 2020). As a result of product testing, the company estimates that the total warranty cost is €32 per machine (€15 parts and €17 labor).

Instructions - Assuming that actual warranty costs are incurred exactly as estimated, what journal entries would be made relative to the following facts?

1. Sale of machinery and the related warranty costs in 2019.

Reference no: EM132527822

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