Dill Computer warranties their $3,000 laptops for 2 years. Typical repair costs for units returned (labor and parts): $100/unit. Usually, only 3% of units sold need repair in the first year after sale, and 4% in year 2. Dill also sells an extended warranty, offering 3 years of additional protection, for $75; usually, only 15% of units sold in a given year need repairs within the 3-year period that begins 2 years after the sale. In year 2kC, Dill Computer sells 1,200 laptops. They also sell 500 extended warranties.
(A) Provide the entries to accrue warranty expense for the usual 2-year period and

(B) Defer revenue using the "sales" method for the extended warranties.

(C) Is Dill "making money" on their extended warranty sales? If so, how much?

Answer rating: 100% (QA)

Solution Part A Provide the entries to accrue warranty expense for the usual 2year period and 3 unit ... View the full answer