Problem $4-$ Warranties

In $2027,$ Junk and Disorderly $($a second$-$hand sports equipment store$)$ sold $5,000$ mountain bikes. Junk and Disorderly offered an in$-$store, no$-$charge, two$-$year warranty on each bike sold. Company management estimates that the average cost of providing the warranty is $$8$ per unit in the first year of coverage and $$11$ per unit in the second year.

Junk and Disorderly' s warranty$-$related expenditures totaled $$36,500$ for labor costs during $2027.$

a$.$ Prepare the journal entry to recognize Junk and Disorderly' s warranty expense in $2027.$

$\backslash$table$[[$ACCOUNT NAME,Amount $($debits are positive, credits negative$)],[,],[,],[,],[,]]$

b$.$ Prepare the journal entry to recognize the warranty service provided in $2027.$

$\backslash$table$[[$ACCOUNT NAME,Amount $($debits are positive, credits negative$)],[,],[,],[,],[,]]$

Intermediate Financial Accounting II

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