Ivanhoe Machinery Corporation, a private company following ASPE sold manufacturing equipment for $2,500 each. Each machine carried with it a 2-year warranty against manufacturing defects. From experience, Ivanhoe Machinery Corporation determined that each machine sold would average $296 in replacement parts. In 2020, the company sold 1,000 machines. Also in 2020, the company incurred $125,000 in total repair costs (the cost of replacement parts from inventory). Ivanhoe Machinery Corporation also sold an extended warranty for its machines. For $460, customers could purchase an extended warranty that extended the warranty on the machine for an additional 2 years. 800 of the customers that bought machines also purchased the extended warranty. Assume the revenue is earned evenly over the two-year contract.

1) Using the Revenue Approach, prepare the journal entry to record the sale of the machines and extended warranties. (Ignore any cost of goods sold entry).

2) Using the Revenue Approach, prepare the journal entry to record the warranty costs incurred during 2020.

3) Using the Revenue Approach, prepare the journal entry to record the year-end adjusting entries at December 31, 2020, for the assurance-type warranties assuming Ivanhoe’s year-end is December 31.

4)Using the Revenue Approach, prepare the journal entry to record the year-end adjusting entries on December 31, 2022, for the service-type warranties. (Note: assume that the cost of repairs has already been recorded during 2022 and prepare any other adjusting entry needed).