Apex Electronics Inc. sells a single product with a 1-year warranty against defects. The company estimates that 5% of the units sold will be defective, and the average cost to repair each defective unit is $40. During the first month of operations, Apex Electronics sold 800 units, and 10 defective units were repaired by the end of the month. What should be the liability for product warranties at the month-end? a. $1,600 b. $1,200 c. $1,000 d. $1,800

Apex Electronics Inc. sells a single product with a 1-year warranty against defects. The company estimates that 5% of the units sold will be defective, and the average cost to repair each defective unit is $40. During the first month of operations, Apex Electronics sold 800 units, and 10 defective units were repaired by the end of the month. What should be the liability for product warranties at the month-end? a. $1,600 b. $1,200 c. $1,000 d. $1,800

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 9MC: Blake Department Store sells television sets with one-year warranties that cover repair and...

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Blake Department Store sells television sets with one-year warranties that cover repair and replacement of television parts. In the month of June, Blake sells forty television sets with a per unit cost of $500. If Blake estimates warranty fulfillment at 10% of sales, what would be the warranty liability reported in June? A. $1,000 B. $2,000 C. $500 D. $20,000
3. Jansen Company sells a product for $400 per unit, which includes a 30-day warranty against product defects. Experience indicates that four percent of the units sold will prove defective, requiring an average repair cost of $50 per unit. During the first month of business, product sales were $320,000, and 20 of the units sold were found to be defective and repaired during the month. What is the accrued liability for product warranties at month-end? a $1,000 b. $600 c. $1,600 d. $2,000
Modem Appliances, Inc. sells food processors for $150 with a 120-day warranty against defects. Past experience indicates that 5% of the processors will have some defect during the warranty period and that the necessary repairs and adjustments will cost $25 per defective unit. Sales for August are $225,000. What is the estimated liability for product warranties for units sold in August? Select one: a. $3,000 b. $1,800 C. $11,250 d. $1,875 e. None of the above
Excom sells radios, and each unit carries a two-year replacement warranty. The cost repair defects under the warranty is estimated at 5% of the sales price. During September, Excom sells 100 radios for $50 each. One radio is actually replaced during September. For what amount in September would Excom debit Product Warranty Expense? a. $50 b. $250 c. $30 d. $120 e. None of the above.
Sea Port Company sells a product that carries a 60-day unconditional warranty against product failure. Based on statistical analysis, Sea Port knows that between the time of sale and the lapse of the warranty, 4% of the units sold will fail and require repair at an avenge cost of $40 per unit. The following data reflect the first three months during which the product was sold. October November December Units sold 30,000 36,000 60,000 Known units of product failure From sales of October 480 600 120 November 300 960 December 900 Prepare the general journal entry to record Sea Port’s estimated liability for product warranties at December 31. Assume that warranty costs of known failures have already been reflected in the records.
Arthur Company sells 1,000 units of radio sets at P9,000 each for cash. Each radio set is under warranty for one year andthe company has estimated from past experience that warranty cost will probably average P500 per unit and that only60% of the units sold will be returned for repairs. During the year, actual payment incurred for repairs is P180,000.What amount would be recorded as estimated warranty liability at the end of the year?a. 300,000 c. 480,000b. 180,000 d. 120,000
A company sold 122 bikes at $180 each. The bikes carry a 3-year warranty for defects. The company estimates that repair costs will average 5.0% of the total selling price. The estimated warranty liability at the beginning of the year was $1,100 and $1,500 in claims were actually incurred during the year to honor the warranty. What was the ending balance in the estimated warranty liability account? Select one: a. $1,098 b. $698 c. $1,272 d. $400 e. $1,498| This has been asked here previously, but different posts with the same questions have different answers. What is the correct one?
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Excom sells radios and each unit carries a two-year replacement warranty. The cost of repair defects under the warranty is estimated at 5% of the sales price. During September, Excom sells 157 radios for $53 each. One radio is actually replaced during September. For what amount in September would Excom debit Product Warranty Expense? a.$26 b.$53 c.$416 d.$4,082
Hopewell sells a line of goods under a six-month warranty. Any defect arising during that period is repaired free of charge. Hopewell has calculated that if all the goods sold in the last six months of the year required repairs the cost would be $2 million. If all of these goods had more serious faults and had to be replaced the cost would be $6 million. The normal pattern is that 80% of goods sold will be fault-free, 15% will require repairs and 5% will have to be replaced. What is the amount of the provision required?
Backpack Co. was organized to sell a single product that carries a 45-day warranty againstdefects. Engineering estimates indicate that 2% of the units sold will prove defective andrequire an average repair cost of $60 per unit. During Backpack’s first month of operations,total sales were 900 units; by the end of the month, five defective units had been repaired.The liability for product warranties at month-end should bea. $1,380.b. $300.c. $1,080.d. $780.
4. Bonita.com sells 6800 units of its product for $460 each. 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 $40 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $4800. What amount should Bonita.com accrue on December 31 for estimated warranty costs? Select answer from the options below a. $8160 b. $32640 c. $ 4800 d. $3360