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(Warranties) Sheryl Crow Equipment Company sold 500 Rollomatics during 2004 at $6,000 each. During 2004, Crow spent $20,000 servicing the 2-year...
11. (Warranties) Sheryl Crow Equipment Company sold 500 Rollomatics during 2004 at$6,000 each. During 2004, Crow spent $20,000 servicing the 2-year warranties thataccompany the Rollomatic. All applicable transactions are on a cash basis.Instructionsa. Prepare 2004 entries for Crow using the expense warranty approach. Assumethat Crow estimates the total cost of servicing the warranties will be $120,000 for2 years.b. Prepare 2004 entries for Crow assuming that the warranties are not an integralpart of the sale. Assume that of the sales total, $150,000 relates to sales of warrantycontracts. Crow estimates the total cost of servicing the warranties will be $120,000for 2 years. Estimate revenues earned on the basis of costs incurred and estimatedcosts
