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On August 1, 2016, Pereira Corporation has sold, on account, 1,600 Wiglows to Mendez Company at $450 each. Mendez also purchased a 1-year service-type warranty on all the Wiglows for $12 per unit. In 2016, Pereira incurred warranty costs of $9,200. Costs for 2017 were $7,000.

Required:

1.	Prepare the journal entries for the preceding transactions.
2.	Show how Pereira would report the items on the December 31, 2016, balance sheet.

CHART OF ACCOUNTS
Pereira Corporation
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 189 Accumulated Depreciation LIABILITIES 211 Accounts Payable 230 Unearned Warranty Revenue 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue 438 Warranty Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 551 Warranty Expense 559 Miscellaneous Expenses 910 Income Tax Expense

Prepare the necessary journal entries to record:

	1. the sale of Wiglows and service warranty on account on August 1, 2016
	2. the warranty costs paid during 2016
	3. the warranty revenue earned in 2016
	4. the warranty costs paid during 2017
	5. the warranty revenue earned in 2017
	Additional Instructions

PAGE 9

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11

Show how Pereira would report the items on the December 31, 2016, balance sheet. Additional Instructions

Pereira Corporation

Partial Balance Statement

December 31, 2016

1	Current Liabilities:
2

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