## Question

###### Monty Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective...

Monty Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2020, the corporation sells for cash 427 computers at a unit price of $2,730. On the basis of past experience, the 2-year warranty costs are estimated to be $166 for parts and $196 for labor per unit. (For simplicity, assume that all sales occurred on December 31, 2020.) The warranty is not sold separately from the computer. (a) - Your answer is partially correct. Record any necessary journal entries in 2020. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Cash 1165710 Sales Revenue 1165710 Warranty Expense 154574 Warranty Liability 154574

## Answers

Cash realized from sales = $427 * 2,730 = $1,165,710

Warranty expense = 427 * (166 + 196) = $154,574

DateAccount titles and explanationDebitCredit1) Cash $1,165,710 Warranty expense $154,574 Service revenue $1,165,710 Warranty Liability $154,574

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