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

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