Nash Company sells televisions at an average price of $838 and also offers to each customer a separate 3-year warranty contract for $81 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 303 televisions and 243 warranty contracts for cash. It estimates the 3-year warranty costs as $19 for parts and $39 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty revenues occurs. 1). What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified? 2) In 2021, Nash Company incurred actual costs relative to 2020 television warranty sales of $2,010 for parts and $3,950 for labor.
Nash Company sells televisions at an average price of $838 and also offers to each customer a separate 3-year warranty contract for $81 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 303 televisions and 243 warranty contracts for cash. It estimates the 3-year warranty costs as $19 for parts and $39 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty revenues occurs.
1).
What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified?
2)
In 2021, Nash Company incurred actual costs relative to 2020 television warranty sales of $2,010 for parts and $3,950 for labor.
Record any necessary
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Account Titles and Explanation
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Debit
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Credit
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(To record the warranty revenue earned.)
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(To record the warranty expense.)
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3).
What amounts relative to the 2020 television warranties would appear on the December 31, 2021, balance sheet and how would they be classified?
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Nash Company
Balance Sheet (Partial) For the Month Ended December 31, 2021For the Year Ended December 31, 2021December 31, 2021 |
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Current AssetsCurrent LiabilitiesIntangible AssetsLong-term LiabilitiesLong-term DebtProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term LiabilitiesTotal Long-term DebtTotal Property, Plant and EquipmentTotal
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$
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Current AssetsCurrent LiabilitiesIntangible AssetsLong-term LiabilitiesLong-term DebtProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term LiabilitiesTotal Long-term DebtTotal Property, Plant and EquipmentTotal Stockholders' Equity:
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$
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