Needing Help with this Intermediate Accounting Problem

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Needing Help with this Intermediate Accounting Problem.

 

Instructions: Dynamo Corporation manufactures toasters. Each toaster comes with a 5-year assurance-type warranty. The toasters sell for $50 each. During Year 1, Dynamo sells 500 toasters, for cash. Past experience shows that the average warranty costs are $5 each or $2,500 for these toasters. In Year 1, Dynamo pays $600 cash for warranty costs on the toasters sold that year.

Required:

	Prepare Dynamo's journal entries related to the sales and warranty in Year 1.

DYNAMO CORPORATION

CHART OF ACCOUNTS

GENERAL LEDGER

	ASSETS		REVENUE
111	Cash	411	Sales Rev
121	Acct Receiv		EXPENSES
141	Inventory	500	Cost of Goods Sold
152	Prepaid Ins.	511	Insuancce Expense
181	Equipment	512	Utilities Expense
189	Acc. Depr	521	Salaries Expense
	LIABILITIES	532	Bad Debt Expense
211		540	Income Expense
231		541	Depreciation Expen
240		551	Warrenty Expense
250		559	Misc. Expense
261		910	Tax Income Expense
	EQUITY
311	Common Stock
331	Retained Earn

 

Prepare Dynamo's journal entries related to the sales and warranty in Year 1 on December 31

GENERAL JOURNAL