2) Over the past 4 years, Matador has estimated warranty expense based on 3.5% of sales. On May 1, 2022, after reviewing its most recent year end number for actual warranties paid, it decided to change this estimate to 4.75%. If Matador had used the 4.75% in the past, warranty expenses would be $150,000 higher in prior years. During fiscal 2022, Matador had earned sales revenues of $2,750,000 of which 20% were cash sales and 80% were credit sales. The bookkeeper calculated warranty expenses for 2022 using the 3.5%. Round answer to nearest whole dollar. Determine the adjustment to ICO. Matador has a corporate tax rate of 30%.

2) Over the past 4 years, Matador has estimated warranty expense based on 3.5% of sales. On May 1, 2022, after reviewing its most recent year end number for actual warranties paid, it decided to change this estimate to 4.75%. If Matador had used the 4.75% in the past, warranty expenses would be $150,000 higher in prior years. During fiscal 2022, Matador had earned sales revenues of $2,750,000 of which 20% were cash sales and 80% were credit sales. The bookkeeper calculated warranty expenses for 2022 using the 3.5%. Round answer to nearest whole dollar. Determine the adjustment to ICO. Matador has a corporate tax rate of 30%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Proctor provides 1 year warranty on every chair it produces and sells. On 12-31-19, proctor reported warranty payable of $960,000. During 2019, proctor recognized $640,000 of warranty expense. Warranty claims of $510,000. Tax rate $21%. A) DTC: 201,600 B) DTA: 174, 300 C) DTC: 130, 000 D) DTA: 228,900
Early in 2020, Oriole Equipment Company sold 400 Rollomatics at $6,600 each. During 2020, Oriole spent $20,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis. (a) Prepare 2020 entries for Oriole. Assume that Oriole estimates the total cost of servicing the warranties in the second year will be $40,000. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit At SaleDuring 2020Dec. 31, 2020 At SaleDuring 2020Dec. 31, 2020 At SaleDuring 2020Dec. 31, 2020
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3
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Woodmier Lawn Products introduced a new line of commercial sprinklers in 2023 that carry a one-year warranty against manufacturer's defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 2% of sales. Sales of the sprinklers in 2023 were $2.8 million. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product: General Journal Accrued liability and expense Warranty expense (2% × $2,800,000) Warranty liability Actual expenditures (summary entry) Warranty liability Cash Debit 56,000 Required 1 Required 2 25,000 Credit 56,000 In late 2024, the company's claims experience was evaluated and it was determined that claims were far more than expected-3% of sales rather than 2%. View transaction list 25,000 Required: 1. Assuming…