Service Warranty Journal Entries
Lesson:
An service warranty is an extra purchase over and above an offering's price.
Assuming that there will be a reasonably estimable value for the warranty's ultimate cost to the vendor, it must be booked at time of sale.
You're an accountant trying to figure out how to book some assurance warranty information on the balance sheet.
You've been briefed with the following facts:
- The business accepted $2,431 in cash as payment for the service warranty.
- The purchase was made in cash.
- The lifetime of the warranty is $3 years.
What are the initial journal entries to add this warranty sale to the balance sheet?
Answer:
-
Sales of a Service Warranty Cash $2,431.00 Unearned Revenue $2,431.00