Early in 2020, Concord Equipment Company sold 500 Rollomatics at $6,500 each. During 2020, Concord spent $20,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.
A) Prepare 2020 entries for Concord.
Assume that Concord estimates the total cost of servicing the warranties in the second year will be $40,000
B) Prepare 2020 entries for Concord assuming that the warranties are not an integral part of the sale (a service-type warranty).
Assume that of the sales total, $61,000 relates to sales of warranty contracts. Warranty costs incurred in 2020 were $20,000. Estimate revenues to be recognized on a straight-line basis.
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