A. In 2020, Johnson's Cycles Inc. sold 1,000 bike helmets. (Selling Price is $40.00 per unit, COGS

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Question:

A. In 2020, Johnson's Cycles Inc. sold 1,000 bike helmets. (Selling Price is $40.00 per unit, COGS is $18.00 per unit.) They offered an in-store replacement, no-charge, two-year warranty on each helmet sold. Company management estimates that the average cost of providing the warranty will be $3.50 per unit sold.

Required

Prepare the summary journal entry to recognize Johnson's warranty expense in 2020 (at the end of 2020)

Prepare a summary journal entry to record the provision of 10 replacement helmets from inventory.

B. During 2019 Investment Digest sold 1,000 subscriptions for $120 each for its investment newsletter, which was for 36 months in duration. The correct adjustment was made in 2019.

Required:

Prepare the adjustment for 2020, note. no new subscriptions were sold.