Teal Company sells televisions at an average price of $814 and also offers to each customer a separate 3-year warranty contract for $81 that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 327 televisions and 277 warranty contracts for cash. It estimates the 3-year warranty costs as $19 for parts and $29 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2017, and straight-line recognition of warranty revenues occurs.
What liability relative to these transactions would appear on the December 31, 2017, balance sheet and how would it be classified?
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Home » Business » Teal Company sells televisions at an average price of $814 and also offers to each customer a separate 3-year warranty contract for $81 that requires the company to perform periodic services and to replace defective parts.