Anas Company sells 6,000 units of its product for $500 each during the year ending December 31, 2017. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $6,000. What amount will be reported on Lulzbot.com's balance sheet as Warranty Liability on December 31, 2017? Select one: a. It cannot be determined. b. $3,000 C. $6,000 d. $9,000

Anas Company sells 6,000 units of its product for $500 each during the year ending December 31, 2017. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $6,000. What amount will be reported on Lulzbot.com's balance sheet as Warranty Liability on December 31, 2017? Select one: a. It cannot be determined. b. $3,000 C. $6,000 d. $9,000

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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During December, Maxum Company sold 3,900 units of a product that carries a 60-day warranty. December sales for this product total $127,000. The company expects 6% of the units to need warranty repairs, and it estimates the average repair cost per unit will be $19. Record the related adjusting entry.
Moon Co. sells food blenders. During 2022, Moon made 37,000 blenders at an average cost of $80. It sold out 25,000 food blenders at an average price of $130. Moon provides a 2-year warranty for each blender sold and estimates that 9% of blenders will be returned for warranty with an estimated cost of $36 each. By the end of 2022, Moon has spent $44,000 servicing the warranty repairs. All the above transactions have been settled in cash. During 2022, Moon has 50 employees who work 5-day per week and get paid each other Friday. By December 22, 2022, Moon has paid salaries of $324,000 and payroll tax expenses of $37,000 for the year.Since the business grows quickly, Moon needs cash to expand. By the end of 2021, the Board of Directors authorized the management to issue 10-year bonds with a par value of $3,000,000, an annual contract interest rate of 8%, and semi-annual interest payments. Moon chose to use the straight-line method to amortize discounts or premiums on its bonds. On…
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