LM LTD$.$ Follows IFRS and it's accounting year ends December $31.$ The commpany sells each unit for $$1500$ and comes with a standard basic $1$ year warranty. The cost of the warranty is estimated to be at $4\%$ of total sales and the company views the standard basic warranty as an assurance type obligation. The annual sales for $2020$ were $$15000000$ and have occured uniformly throughout the year. Thus, the annual warranty costs would spread over $2$ years $($ some in the year of sale and the balance in the year following the sales$).$In$,2020$ the company incurred actual costs of $$16$ per unit sold for parts and labour to service the units sold in $2020.$ The company also offers optional $2-$year extended warranty contract which follows the expiry of the standard basic warranty obligation. In $2020,$ the company issued $7000$ such extended warranty contracts on the sales at a unit price of $$100$ per contract. Further, it also expects the $2-$yr extended warranty revenues to be earned et $$40$ in the first year it comes into effect and $$60$ in the $2$nd yr$.$ Required: for the sales of $2020$ Only

$1)$ Prepare journal entries required to record the sale and all the warranty transactions and adjustments for $2020.$

$2)$ what liabilities relative to these transactions would be reported on Dec. $31,2020$ Balance Sheet. show how would these be classified. additional info:

In $2021,$ the company incurred actual costs of $$27$ per unit for parts and labour to service the standard basic warranty claims associated with the $2023$ sales. In $2021,$ it also incurred additional actual costs of $$124000$ for parts and labour to service the claims associated with the extended warranty contracts. Use this additional infos to answer questions. $3)-$prepare journal entries for $2021$ to record transactions related to both the $2020$ standard basic and $2020$ extended warranties. $4)-$what amounts relative to the $2021$ warranty transactions would be reported on the Dec, $31,2021$Balance sheet. Show how these would be classified.

Answer rating: 100% (QA)

ANSWER For the sales of 2020 Journal Entries for 2020 Date Account Titles and Explanation Debit Cred... View the full answer