Question: Dynamo Corporation manufactures toasters Each toaster comes with a five year
Dynamo Corporation manufactures toasters. Each toaster comes with a five-year warranty. The toasters sell for $50 each and during Year 1 Dynamo sells 500 toasters. Past experience shows that the average warranty costs are $5 each or $2,500 for these toasters. In Year 1, Dynamo spends $600 for warranty costs on the toasters sold that year. Prepare Dynamo’s journal entries related to the sales and warranty in Year 1 using the expense warranty accrual method.
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