Carla Vista Company offers a five-year warranty on its products. Carla Vista previously estimated warranty costs to be 3% of sales but in 2025 revised this estimate to 1% due to process and quality control improvements. Carla Vista reported warranty costs of $77700 on $2590000 in 2023 and $92700 on $3090000 in 2024. Sales revenue for 2025 was $5180000. What is the adjustment to Retained Earnings in 2025 (ignore income tax considerations)? O $62700 Ⓒ $51800 O $114500 O $0

Carla Vista Company offers a five-year warranty on its products. Carla Vista previously estimated warranty costs to be 3% of sales but in 2025 revised this estimate to 1% due to process and quality control improvements. Carla Vista reported warranty costs of $77700 on $2590000 in 2023 and $92700 on $3090000 in 2024. Sales revenue for 2025 was $5180000. What is the adjustment to Retained Earnings in 2025 (ignore income tax considerations)? O $62700 Ⓒ $51800 O $114500 O $0

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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2) Over the past 4 years, Matador has estimated warranty expense based on 3.5% of sales. On May 1, 2022, after reviewing its most recent year end number for actual warranties paid, it decided to change this estimate to 4.75%. If Matador had used the 4.75% in the past, warranty expenses would be $150,000 higher in prior years. During fiscal 2022, Matador had earned sales revenues of $2,750,000 of which 20% were cash sales and 80% were credit sales. The bookkeeper calculated warranty expenses for 2022 using the 3.5%. Round answer to nearest whole dollar. Determine the adjustment to ICO. Matador has a corporate tax rate of 30%.
Pharoah Company offers a five-year warranty on its products. Pharoah previously estimated warranty costs to be 3% of sales but in 2025 revised this estimate to 1% due to process and quality control improvements. Pharoah reported warranty costs of $80100 on $2670000 of sales in 2023 and $95100 on $3170000 in 2024 . Sales revenue for 2025 was $5170000. What is the adjustment to retained earingings in 2025?
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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Milima Electronic Company sells on account printers for RM1,500 each with a 2-year warranty for performing periodic services and replacing defective parts. Because of COVID 19 pandemic, the company sold only 700 printers on December 2019, however, based on past experience, the company has estimated the total 2-year warranty costs as RM30 for parts and RM60 for labor. On 2020, Miley incurred actual warranty costs relative to 2019 printer sales of RM10,000 for parts and RM18,000 for labor. REQUIRED: (a) Record the above transactions by using the expense warranty treatment for the years 2019 and 2020. (b) If the company sold printers in cash, what are the amounts of warranty expense for 2019 and 2020? (c) Determine amounts of warranty liability that should be recorded under current liabilities and long-term liabilities for the year 2019?
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Oak Co. offers a three-year warranty on its products. Oak previously estimated warranty costs to be 2% of sales. Due to atechnological advance in production at the beginning of 2010, Oak now believes 1% of sales to be a better estimate of warranty costs. Warranty costs of 80,000 and 96,000 were reported in 2008 and 2009, respectively. Sales for 2010 were 5,000,000. What amount should be disclosed in Oak’s 2010 financial statements as warranty expense?a. 50,000b. 88,000c. 100,000d. 138,000
During 2008, Luciana Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 3% within 12 months following sale and 5% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2007 and 2008 are as follows: Sales Actual expenditures 2007 40,000,000 1,000,000 2008 50,000,000 4,000,000 At December 31, 2008, Luciana would report estimated warranty liability of O None of these O 2,200,000 O 1,500,000 O 2,500,000
Required:1. Prepare the adjustment to correct the estimated warranty liability on December 31, 2022.