What will be the balance of current liabilities

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Reference no: EM132837736

Question - Bullfrog Computing (BFC) sells computers for $2,000 each, which includes a 3-year warranty that requires the company to perform periodic services and to replace defective parts. The 3 year warranty is considered to have a sales value of $200 (included in the computer selling price of $2,000). During 2017, BFC sold 500 computers on account. Based on past experience, the company has estimated the total 3-year warranty costs at $80 for parts that come from BFC's inventory and $100 for labour (for each computer), spread evenly over the three years. (Assume sales all occurred on December 31, 2017.)

In 2018, BFC incurred actual warranty costs relative to 2017 computer sales of $10,000 for parts and $12,000 for labour.

Instructions -

a. Using the revenue based approach, prepare the entries to reflect the above transactions for 2017 and 2018.

b. What will be the balance of current liabilities and the balance of long-term liabilities (regarding warranties) on the 2018 statement of financial position?

Reference no: EM132837736

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