5 Check my work Exercise 13-16 (Algo) Extended warranties [LO13-5, 13-6] Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $430,000 for these extended warranties, and on average the warranties were 20% expired by year end. Required: 1-a. Does this situation represent a loss contingency? 1-b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and recognition of any revenue associated with those warranties. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 How should it be accounted for? Revenue is recognized as a(n) and warranty revenue is computed using the Req 1A Req 2 >

5 Check my work Exercise 13-16 (Algo) Extended warranties [LO13-5, 13-6] Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $430,000 for these extended warranties, and on average the warranties were 20% expired by year end. Required: 1-a. Does this situation represent a loss contingency? 1-b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and recognition of any revenue associated with those warranties. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 How should it be accounted for? Revenue is recognized as a(n) and warranty revenue is computed using the Req 1A Req 2 >

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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Current Attempt in Progress Wildhorse Inc, manufactures and sells computers that include an assurance-type warranty for 90 days. Wildhorse offers an optional extended coverage plan under which it will repair or replace any defective part for three years from the expiration of the assurance- type warranty. Because the optional extended coverage plan is sold separately, Wildhorse determines that the three years of the extended coverage represent a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,420 on October 1, 2023. Wildhorse determines that the stand-alone selling price of each is $3,220 and $200. respectively. Further, Wildhorse estimates, based on historical experience, that it will incur $230 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,400 (b) Prepare the journal entry (or entries) to record the cash sale of the…
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Warranties Leaky Black sells cars for $30,000 (cost to Leaky of 15,000) that come with a 2 year assurance-type warranty and the option for a 3 year extended warranty (beginning in year 3) for $5,000. The estimated warranty costs associated with the assurance type warranty are $2,000. The actual warranty costs are as follows: $500, $1,500, $1,000, S500, $2,000 for years 1- 5 respectively. Prepare all journal entries. NO STATE UNIVERSITY
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Warranty Liability: (same info as previously described) A home improvement store sells lawnmowers and includes a warranty they will be free of defects for 1 year. The store estimates $2 per lawnmower sold will result in warranty covered defects. The company sells 1000 lawnmowers during the accounting period. The company also replaces $600 worth of lawnmowers due to ACTUAL warranty issues with customers during the accounting period. What is the Warranty Reserve balance (liability) based on All the information above for the accounting period. You can assume the beginning balance of the liability account was $0. O $600 O Not enough info O $2,000 O $1,400