Alvarado Company

Alvarado Company sells a machin” rel=”nofollow”>ine for S7.400 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales bein” rel=”nofollow”>ing made evenly throughout the year, the company sells 600 machin” rel=”nofollow”>ines in” rel=”nofollow”>in 2017 (warranty expense is in” rel=”nofollow”>incurred half in” rel=”nofollow”>in 2017 and half in” rel=”nofollow”>in 2018). As a result of product testin” rel=”nofollow”>ing, the company estimates that the warranty cost is $390 per machin” rel=”nofollow”>ine ($170 parts and $220 labor).
Assumin” rel=”nofollow”>ing that actual warranty costs are in” rel=”nofollow”>incurred exactly as estimated, what journal entries would be made relative to the followin” rel=”nofollow”>ing facts? (a)Sale of machin” rel=”nofollow”>inery and warranty expense in” rel=”nofollow”>incurred in” rel=”nofollow”>in 2017. (b)Warranty accrual on December 31, 2017. (c)Warranty costs in” rel=”nofollow”>incurred in” rel=”nofollow”>in 2018. (d)What amount, if any, is disclosed in” rel=”nofollow”>in the balance sheet as a liability for future warranty costs as of December 31. 2017?

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