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What entries create under the expense warranty approach

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Question - Pharoah Equipment Company sells computers for $1,300 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 950 computers.

Based on past experience, the company has estimated the total 2-year warranty costs as $40 for parts and $60 for labor. (Assume sales all occur at December 31, 2020.)

In 2021, Pharoah incurred actual warranty costs relative to 2020 computer sales of $12,400 for parts and $18,600 for labor.

Required - What entries create under the expense warranty approach and what balance do they create under current liabilities for 2020?

Reference no: EM132489135

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