4. A Corp. began operations in January 2021. A sells one product for $400 each that carries a two-year warranty against defects. A's management projects that 5% of the product will require repair during the first year of the warranty while approximately 1% will require repair during the second year of the warranty. Warranty costs per unit are $90. Sales and warranty information for 2021 and 2022 are as follows: 2021: Sold $800,000 on account; Required Sales tax charged at 8% on all sales. Paid warranty expenditures of $7000. 2022: Sold $900,000 on account; Required Sales tax charged at 8% on all sales. Paid warranty expenditures of $12,000.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Yu.21.
4. A Corp. began operations in January 2021. A sells one product for $400 each that
carries a two-year warranty against defects. A's management projects that 5% of the
product will require repair during the first year of the warranty while approximately
1% will require repair during the second year of the warranty. Warranty costs per
unit are $90. Sales and warranty information for 2021 and 2022 are as follows:
2021: Sold $800,000 on account; Required Sales tax charged at 8% on all sales. Paid warranty
expenditures of $7000.
2022: Sold $900,000 on account; Required Sales tax charged at 8% on all sales. Paid warranty
expenditures of $12,000.
Required:
1. Prepare journal entries that summarize the sales and any aspects of the warranty for 2021 and
2022.
Transcribed Image Text:4. A Corp. began operations in January 2021. A sells one product for $400 each that carries a two-year warranty against defects. A's management projects that 5% of the product will require repair during the first year of the warranty while approximately 1% will require repair during the second year of the warranty. Warranty costs per unit are $90. Sales and warranty information for 2021 and 2022 are as follows: 2021: Sold $800,000 on account; Required Sales tax charged at 8% on all sales. Paid warranty expenditures of $7000. 2022: Sold $900,000 on account; Required Sales tax charged at 8% on all sales. Paid warranty expenditures of $12,000. Required: 1. Prepare journal entries that summarize the sales and any aspects of the warranty for 2021 and 2022.
Expert Solution
steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Accounting for Guarantees and Warranties
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education