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Record the credit sales of the computer

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On March 1, 2020, Tecumseh Computers delivered a computer system to a buyer. The agreed-upon price is $28,000. Included in this price is a 12-month assurance warranty that the system will be fixed or replaced if it does not perform to certain specifications and 30 hours of service to maintain the system over that period. The assurance warranty is not sold separately and the stand-alone selling price for the maintenance service is $2,250. The company also estimates that, based on past experience, the warranty costs for defective product should be estimated at $ 2,900. By December 31, 2020, the year end of the company, 15 hours of service are performed at a cost of $500 (cash).

Problem 1: Give the entry(ies) on March 1, 2020 to record the credit sales of the computer and the service maintenance and of the warranty liability.

Problem 2: Give the entry on December 31, 2020 to recognize the revenue on the service maintenance and the related service expense.

Reference no: EM132692634

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