A new product introduced by Reyes Promotions carries a two-year warranty against defects. The estimated warranty costs related to peso sales are as follows: Year of sale... 3% 5% Year after sale... Sales and actual warranty expenditures for the years ended December 31, 2020 and 2021 are as follows: Sales 800,000 1,000,000 Expenditures 12,000 70,000 2020 2021 11. How much is the warranty expense in 2021? 12. How much is the estimated liability as of December 31, 2021? Assume the 2020 warranty did not yet expire.

A new product introduced by Reyes Promotions carries a two-year warranty against defects. The estimated warranty costs related to peso sales are as follows: Year of sale... 3% 5% Year after sale... Sales and actual warranty expenditures for the years ended December 31, 2020 and 2021 are as follows: Sales 800,000 1,000,000 Expenditures 12,000 70,000 2020 2021 11. How much is the warranty expense in 2021? 12. How much is the estimated liability as of December 31, 2021? Assume the 2020 warranty did not yet expire.

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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What amount should be reported as the warranty liability for 2021 and 2022, respectively?* a. 20,000 and 170,000 b. 170,000 and 650,000 c. 500,000 and 650,000 d. 500,000 and 170,000
Smith Electic (SE) owed Estimated Warranty Payable of $1,100 at the end of 2023. During 2024, SE made sales of $100,000 and expects product warranties to cost the company 5% of the sales. During 2024, SE paid $2,600 for warranties. What is SE's Estimated Warranty Payable at the end of 2024? OA. $2,600 OB. $5,000 O C. $6,100 OD. $3,500
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Sales made in 2021 for $3,000,000 includes a 2-year warranty coverage, included in the price. The estimated cost for warranty is expected to be 2% for the first year and 5% for the second year. How much warranty expense should be recorded in 2021? Question 4 options: $60,000 $150,000 $100,500 $210,000
In 2018, Carver Electronics Co. began selling a new computer that carried a two-year warranty against defects. Based on the manufacturer’s recommendations, Carver projects estimated warranty costs (as a percentage of dollar sales) as follows: First year of warranty…………………………………………………………….. 4% Second year of warranty………………………………………………………… 7% Sales and actual warranty repairs for 2018 and 2019 are as follows: 2019 2018 Sales $850,000 $700,000 Actual warranty repairs 30,750 18,500 1. Give the necessary journal entries to record the liability at the end of 2018 and 2019, assuming that there were no collections of previously reserved balances. 2. Analyze the warranty liability account as of the year ended December 31, 2019, to see if the actual repairs approximate the estimate. Should Carver revise the manufacturer’s warranty estimate? (Assume sales and repairs occur evenly throughout the year).
Grouper Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first year after sale-3% of sales; second year after sale-4% of sales; and third year after sale-5% of sales. Sales and actual warranty expenditures for the first three years of business were: Sales Warranty Expenditures 2021 $870,000 $17,100 2022 1,010,000 48,400 2023 1,041,000 80,000 (a) Calculate the amount that Grouper should report as warranty expense on its 2023 income statement and as a warranty liability on its December 31, 2023 SFP using the assurance-type warranty (expense-based approach). Assume that all sales are made evenly throughout each year and that warranty expenditures are also evenly spaced according to the rates above. Warranty expense $ Warranty liability $
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13. Central Products sells a certain press for $20,000. Included in this price is an implied service contract of $800. Fifty machines were sold in 2020. Warranty expense incurred during 2020 amounted to $25,000. The company uses the sales warranty accrual method. Which entry would probably not be made in 2020? 25,000 Unearned Warranty Revenue Warranty Revenue а. 25,000 b. Cash 1,000,000 960,000 40,000 Sales Unearned Warranty Revenue Cash 40,000 с. Warranty Revenue 40,000 d. Warranty Expense 25,000 Cash 25,000
Required:1. Prepare the adjustment to correct the estimated warranty liability on December 31, 2022.
The following data for Roco Corp. Are available for 2021: Installment accounts, receivable 12/31/21 100,000 Installment sales for 2021 350,000 Gross profit on installment sales 40% 1. Using the cost recovery method of reporting installment sales, the realized gross profit for 2021 is 2. Using the installment method of reporting installment sales, the realized gross profit for 2021 is