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Entries for warranty expense transactions

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26. James Equipment Company sells computers for $1,500 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2008, the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $30 for parts and $60 for labor. (Assume sales all occur at December 31, 2008.)
In 2009, James incurred actual warranty costs relative to 2008 computer sales of $10,000 for parts and $18,000 for labor
Prepare your responses to these problems on a separate Excel spreadsheet as directed on the Problem Set 3 directions.
a) Under the expense warranty treatment, give the entries to reflect the above transactions (accrual method) for 2008 and 2009.
b) Under the cash basis method, what are the Warranty Expense balances for 2008 and 2009?

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The solution prepares entries for warranty expense transactions.

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