Answered: a new product that includes a one-year…

a new product that includes a one-year warranty on parts. In November, 1000 units are sold. Management believes that 15% of the

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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Question

On December 1, XYZ Limited introduces a new product that includes a one-year warranty on parts. In November, 1000 units are sold. Management believes that 15% of the units will be defective and that the average warranty costs will be $50 per unit. Prepare the adjusting entry at November 30 to accrue the estimated warranty cost.

Definition Definition Entries made at the end of every accounting period to precisely replicate the expenses and revenue of the current period. This is also known as end of period adjustment. It can also refer to financial reporting that corrects errors made previously in the accounting period. Every adjustment entry affects at least one real account and one nominal account.

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