Dynamo Corporation manufactures toasters. Each toaster comes with a 5-year assurance-type warranty. The toasters sell for $50 each. During year 1, Dynamo sells 500 toasters. Past experience shows that the average warranty costs are $5 each or $2,500 for these toasters. In year 1, Dynamo spends $600 for warranty costs on the toasters sold that year. Prepare Dynamo's journal entries related to the sales and warranty in year 1.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Dynamo Corporation manufactures toasters. Each toaster comes with a 5-year assurance-type warranty. The toasters sell for $50 each. During year 1, Dynamo sells 500 toasters. Past experience shows that the average warranty costs are $5 each or $2,500 for these toasters. In year 1, Dynamo spends $600 for warranty costs on the toasters sold that year. Prepare Dynamo's journal entries related to the sales and warranty in year 1.

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