Reference no: EM132642575

Marin Inc. sells portable computer equipment with a two-year warranty contract that requires the corporation to replace defective parts and provide the necessary repair labour. During 2020, the corporation sells for cash 380 computers at a unit price of $2,550. Ignore any cost of goods sold. Based on experience, the two-year warranty costs are estimated to be $166 for parts and $189 for labour per unit. (For simplicity, assume that all sales occurred on December 31, 2020.) The warranty is not sold separately from the equipment, and no portion of the sales price is allocated to warranty sales. Marin follows ASPE.

Question 1: Record the 2020 journal entry, assuming the cash basis is used to account for the warranties.

Question 2: Record the 2020 journal entries, assuming the accrual basis assurance-type approach is used to account for the warranties

Question 3: What liability relative to these transactions would appear on the December 31, 2020 balance sheet? How would it be classified if the accrual basis assurance-type approach is used? Marin Inc Balance Sheet (Partial) As at December 31, 2020 Short-Term Liabilities Warranty Liability 134900