1. What amount of warranty expense would be charged against 2021 revenue? 2. What amount of warranty liability would appear in the December 31, 2021 statement of financial position?
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1. What amount of warranty expense would be charged against 2021 revenue?
2. What amount of warranty liability would appear in the December 31, 2021
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- The Weeknd Co., a machinery dealer, sells a machine for P22,200 under a 1-year warranty contract that requires the company to replace all defective parts and to provide the necessary repair labor at no cost to the customers. With sales being made evenly throughout the year, The Weekend Co. sells for cash 600 machines in 2020 (half of the warranty expense is incurred in 2020, half in 2021). Based on experience, the 1-year warranty costs are estimated to be P510 parts and P660 labor. Assume that in 2020, these warranty costs are incurred exactly as estimated QUESTIONS: What amount of warranty expense would be charged against 2020 revenue? What amount of warranty liability would be appeared on the December 31,2020, statement of financial position?4). These warranty contracts are not sold separately from the computers. Brooks Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2025, a cash sale was made. 400 computers were sold, each with a unit price of $2,500. On the basis of past experience, the 2-year warranty costs are estimated to be $155 for parts and $185 for labor per unit. For simplicity, assume that all sales occurred on December 31, 2025. During 2026, the actual warranty costs to Brooks Corporation were $21,400 for parts and $39,9000 for labor. HINT: Chapter-12, Assurance-Type Warranty, Example 12.16 REQUIRED: 4A). 4B). 4C). A journal entry to record: The sales revenue for 2025. The warranty liability as of December 31, 2025 As of December 31, 2025, the Balance Sheet presentation for Current-Liabilities and Long-Term Liabilities. A journal entry, for 2026, to record the actual warranty costs.Situation 1Kurama Co., a machinery dealer, sells a machine for P22,200 under a 1-year warranty contract that requiresthe company to replace all defective parts and provide the necessary repair labor at no cost to customers. Withsales being made evenly throughout the year, Kurama sells for cash 600 machines in 20x1 (half of the warrantyexpense is incurred in 20x1, half in 20x2.) Based on previous experience, the 10-year warranty costs areestimated to be P510 and P660 labor. Assume that in 20x1, these warranty costs are incurred exactly asestimated. Required: 1. What amount of warranty expense would be charged against 20x1 revenue? _________2. What amount of warranty liability would appear on the December 31, 20x1 statement of financialposition? __________ Situation 2Cuyos, Inc., a dealer of household appliances, sells washing machines at an average price of P8,100. Thecompany also offers each customer a separate 3-year warranty contract for P810 that requires the company toprovide…
- Vera., a dealer of household appliances, sells washing machines at an average price of P8,100. The Company also offers to each customer a separate 3-year warranty contract for P810 that requires the Company to provide periodic maintenance services and to replace defective parts. During 2022, Vera sold 300 washing machines and P270 warranty contracts for cash. The Company estimates that the warranty costs are P180 for parts and P360 for labor. Assume sales occurred on December 2022, Veras policy is to recognize income from the warranties on a straight line basis. In 2023, Vera, incurred actual costs relative to 2022 warranty sales of P18,000 for parts and P36,000 for labor. Q10 – What is the amount of current liability relative to these transactions would appear on the 12/31/2022 SFP? Q11 – What is the amount of non-current liability relative to these transactions would appear on the 12/31/2022 SFP? Q12 – What amount of warranty expense would be shown on the income statement for the…Cupola Awning Corporation introduced a new line of commercial awnings in 2024 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 4% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales $ 5,770,000 Actual Warranty Expenditures $ 59,500 Required: 1. Does this situation represent a loss contingency? 2. Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of the warranty that should be recorded during 2024. 3. What amount should Cupola report as a liability at December 31, 2024? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Loss contingency Required 3 Does this situation represent a loss contingency?Bugs Appliance Company’s accountant has been reviewing the firm’s past television sales. For the past years,Bugs has been offering a special service warranty on all television sold. With the purchase of a television, thecustomer has the right to purchase a 3-year service contract for an extra P1,000.Information concerning past television and warranty contract sales is given below:2020 2019Television sales in units 550 460Sales price per unit P55,000.00 P48,000.00Number of service contracts sold 350 300Expenses relating to television warranties P38,620 P13,400Bugs’ accountant has estimated from past records that the pattern of repairs has been 40% in the year of sale,36% first year after sale and 24% on 2 nd year of sale. Sales of the contracts are made evenly during the year.a) What is the adjusted balance of the unearned service contracts as of December 31, 2020?b) How much profit on service contract would be recognized in year 2020?
- Everdeen Company sells computers for P20,000 eachand also gives each customer a 3-year warranty that requires the company to perform periodic servicesand to replace defective parts. During 2021, the company sold 5—computers. Based on experience, the company has estimated the total 3-year warranty costs as P120 for parts and P150 for labor. In 2021, Everdeen Company incurred actual warranty costs relative to 2021 computer sales of P5,400 for parts and P12,600 for labor. 1. The amount reported as warranty expense in 2021 is2. The amount reported under Estimated warranty obligation isCupola Awning Corporation introduced a new line of commercial awnings in 2021 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 2% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Actual Warranty Expenditures $60,000 Sales $5,510,000 Required: 1. Does this situation represent a loss contingency? 2. Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of the warranty that should be recorded during 2021. 3. What amount should Cupola report as a liability at December 31, 2021? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Does this situation represent a loss contingency? Loss contingency Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare journal entries that…Wally's Party Warehouse provides wholesale party equipment and materials to party shops. In 2022, Wally's sold 30 bounce houses at $30,000 each. The bounce houses carry a three-year warranty for defects. Wally estimates that repair costs will average 2% of the total selling price. The estimated warranty liability at the beginning of the year was $26,000. Claims of $19,000 were actually incurred during the year to honour warranties. Required: What was the balance in the Estimated Warranty Liability account at the end of the year? fill in the blank 1
- Wally's Party Warehouse provides wholesale party equipment and materials to party shops. In 2022, Wally's sold 30 bounce houses at $30,000 each. The bounce houses carry a three-year warranty for defects. Wally estimates that repair costs will average 2% of the total selling price. The estimated warranty liability at the beginning of the year was $26,000. Claims of $19,000 were actually incurred during the year to honour warranties. Required: What was the balance in the Estimated Warranty Liability account at the end of the year?Part A: Giordano Corp. sold machinery for $2,000,000 and it was delivered in November 2020. On November 20, the customer informed Giordano Corp. that they were satisfied with the machinery. Giordano Corp. provided a warranty on the machinery for two years from November 20, 2020. The initial estimated warranty cost to Giordano Corp was estimated at $200,000. The stand-alone-value of the warranty is $150,000 and of the machinery is $1,900,000. The machinery can be purchased without the warranty by the customer. What would be the amount of unearned revenue on November 20 recorded by Giordano Corp.? (Round percentages to whole numbers). Show your work. a) Between $1,800,000-$1,900,000 b) Between $150,000-$160,000 c) None of the choices d) Between $140,000 - $147,000 e) Between $1,900,000-$2,000,000Carla Vista Resellers Ltd. (CVRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $36,480, of which $24,000 had been incurred before year end ($18,240 on replacement appliances and $5,760 for parts). For an additional charge of $144, CVRL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2024, CVRL sold 480 three-year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $14,400. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $43,200, which it…
