Reference no: EM132825481

Problem 1: Write the journal entries of the following transactions

1. During 2020, BBE sold 100 warranties for $5,000 each on its bathtubs. The warranty period is five years. Historically, the warranties have resulted in a cost of approximately $500 each per year. BBE uses the cash basis to recognize the warranty expense and revenue. During 2020, no warranty costs were incurred.

2. On December 31, 2020, BBE was notified that it will need to perform a cleanup every 10 years of the area surrounding its plant. BBE estimated that the costs of the cleanup will be approximately $500,000 in 10 years. Thomas indicated that, because the amount is not due for years, there is no need to recognize anything at this point. However, the company also publicly pledged they would spend another $50,000 to landscape and enhance the area around their plant