ABC manufactures and sells computers that include an assurance type warranty for the first 90 days. ABC offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance type warranty. Because the optional extended coverage plan is sold separately, ABC determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $4,600 on August 1, 2022 and ABC determines the standalone selling price of each is $4,000 and $600, respectively. Further ABC estimates it will incur $300 in costs to repair defects that arise within the 90 day coverage period. The cost of the equipment is $1,800. Assume that the $300 in costs to repair defects in the computers occurred on August 24, 2022. Prepare the entries to record the transactions.
ABC manufactures and sells computers that include an assurance type warranty for the first 90 days. ABC offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance type warranty. Because the optional extended coverage plan is sold separately, ABC determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $4,600 on August 1, 2022 and ABC determines the standalone selling price of each is $4,000 and $600, respectively. Further ABC estimates it will incur $300 in costs to repair defects that arise within the 90 day coverage period. The cost of the equipment is $1,800. Assume that the $300 in costs to repair defects in the computers occurred on August 24, 2022. Prepare the entries to record the transactions.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 10E
Related questions
Question
Please Solve In 20mins I will Thumbs-up
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning