Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers areoffered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $416,00for these extended warranties (approximately evenly throughout the year).Required:1-a. Does this situation represent a loss contingency?1.b. How should it be accounted for?2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recordedduring the year.Complete this question by entering your answers in the tabs below.Reg 1AReq 1BReq 2Does this situation represent a loss contingency?Loss contingencyComplete this question by entering your answers in the tabs below.Req 1AReq 1BReq 2How should it be accounted for?Revenue is deferred as aand warranty expense is computed using thein 2021.< Req 1AReq 2 >Req 1AReq 1BReq 2Prepare journal entries that summarize sales of the extended warranties and any aspects of the warrantythe year. (If no entry is required for a transaction/event, select "No journal entry required" in the first accito 2 decimal places.)View transaction listJournal entry worksheet12>Record the sale of extended warranty.Note: Enter debits before credits.EventGeneral JournalDebitCredit1Record entryClear entryView general journal< Req 1BReq 2 >Req 1AReq 1BReq 2Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recorded duringthe year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answersto 2 decimal places.)View transaction listJournal entry worksheet12>Record the revenue earned on extended warranty.Note: Enter debits before credits.EventGeneral JournalDebitCredit2Record entryClear entryView general journal< Req 1BReq 2 >

1A) Loss contingency - No 1B) Revenue is deferred as a liability and the warranty expense is…

Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $416,00 for these extended warranties (approximately evenly throughout the year). Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recorded during the year.

Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $416,00 for these extended warranties (approximately evenly throughout the year). Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recorded during the year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: On January 1, 2020, Jet Air Inc. contracted with Systems Plus Inc. to manufacture heavy equipment.…

A: Equipment recorded value = Present value of face value of note + Present value of interest payments…

Q: Required: 1-a Prepare the year-end entries for any amounts that should be recorded as a result of…

A: The liability that may or may not have the potential to take place due to unpredictable future event…

Q: A corporations sells computers under a 2 year warranty contract that requires the corporation to…

A: Given that: Sale of 375 computers at a unit price of $2300

Q: Vroom Vacuums sells the Tornado vacuum cleaner. Each Tornado has a one-year warranty that covers any…

A: It's important to note that the extended warranty is a separate performance obligation so it can be…

Q: Sandhill Inc. manufactures and sells computers that include an assurance-type warranty for 90 days.…

A: Journal entries are used to record business transactions. The company making sales also provides…

Q: Prepare the journal entry to record this transaction on January 2, 2025, and on December 31, 2025…

A: The warranty expense is the expense which is used by the company and the expense which is associated…

Q: On January 1, 2021, Enzo S.r.l. sold and delivered a car to a customer for $80,000 cash. The car…

A: Warranty - a type of written guarantee given to the buyer of the asset or goods by the seller with a…

Q: d. December 31, Year 3-Interest payment. Date Dec. 31, Year 3 Account Name Date Dec. 31, Year 3 To…

A: To raise funds, notes can be issued. The notes are issued at a discount, which means that the cash…

Q: On January 2, 2025, Sunland Company sells production equipment to Bramble Inc. for $54,000. Sunland…

A: Step 1:Preparation of journal entries. DateAccount Titles and ExplanationDebitCreditJan 2,…

Q: (a) A manufacturer gives warranties at the time of sale to purchasers of its product. Under the…

A: To prepare the necessary journal entry, we need to calculate the expected cost of fulfilling the…

Q: Nash Corporation sells computers under a 2-year warranty contract that requires the corporation to…

A: JOURNAL ENTRIES Journal Entry is the First stage of Accounting Process. Journal Entry is the Process…

Q: LIhe tollowing intormation applies to the questions displayed below. On October 29, Lobo Co. began…

A: Answer are as follows

Q: Habek Hardware Inc. provides a product warranty for defects on two major lines of items sold since…

A: Warranty: Warranty expense is the amount that a company needs to pay to the customers in case the…

Q: On December 31, 2026, Dieker Company sells equipment to Tabor Inc. for $125,000. Dieker includes a…

A: Warranty: It implies a guarantee or a kind of promise made by the seller to the buyer related to the…

Q: Required: 1. Prepare the journal entry to record the acquisition of the tractor. 2. How much…

A: As per IFRS, 'Financial Instruments' financial liabilities should be recorded initially at their…

Q: Prepare the 2023 entries for Bramble assuming that the warranties are not an integral part of the…

A: Journal entries form the basis for the preparation of financial statements. It is the starting point…

Q: 0% of its products sold are brought back to the retailer within one year for major repairs or…

A: As per rule, allowed to answer first three subparts and post the remaining in the next submission.

Q: ABC Company sells televisions at an average price of P15,000 and also offers a separate 2-year…

A: Calculation of unearned warranty revenue: Warranty contract. = P2000 No. Of contracts. =…

Q: t titles are automatically indented when amount is entered. Do not indent manually. Round…

A: The amount ofrevenue recieved towards warranty contracts is for 2 years. The warranty revenue to be…

Q: The following two independent situations involve loss contingencies. Part 1: Benson Company sells…

Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are
offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $416,00
for these extended warranties (approximately evenly throughout the year).
Required:
1-a. Does this situation represent a loss contingency?
1.b. How should it be accounted for?
2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recorded
during the year.
Complete this question by entering your answers in the tabs below.
Reg 1A
Req 1B
Req 2
Does this situation represent a loss contingency?
Loss contingency
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 2
How should it be accounted for?
Revenue is deferred as a
and warranty expense is computed using the
in 2021.
< Req 1A
Req 2 >
Req 1A
Req 1B
Req 2
Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty
the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first acci
to 2 decimal places.)
View transaction list
Journal entry worksheet
1
2
>
Record the sale of extended warranty.
Note: Enter debits before credits.
Event
General Journal
Debit
Credit
1
Record entry
Clear entry
View general journal
< Req 1B
Req 2 >
Req 1A
Req 1B
Req 2
Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recorded during
the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers
to 2 decimal places.)
View transaction list
Journal entry worksheet
1
2
>
Record the revenue earned on extended warranty.
Note: Enter debits before credits.
Event
General Journal
Debit
Credit
2
Record entry
Clear entry
View general journal
< Req 1B
Req 2 >

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

A consumer goods company provides warranties on its products. The company has been in business for decades and has a good history of warranty claim data. At what point should the company record warranty expense? O When the customer mails the item to the company for repair. O At the time warranty work is performed. O In the period of the sale. O When the customer receives the repaired item.
Das Medical introduced a new implant that carries a five-year warranty against manufacturer's defects. Based on industry experience with similar product introductions, warranty costs are expected to approximate 2% of sales. Sales were $21 million and actual warranty expenditures were $31,750 for the first year of selling the product. Complete the following T-account to determine the amount (if any) Das should report as a liability at the end of the year. Note: Enter your answers in whole dollars. Beginning Balance Ending Balance Debit Warranty Liability Credit
What is the correct answer and show the solution.
Das Medical introduced a new implant that carries a five-year warranty against manufacturer's defects. Based on industry experience with similar product introductions, warranty costs are expected to approximate 3% of sales. Sales were $9 million and actual warranty expenditures were $38,750 for the first year of selling the product. Complete the following T-account to determine the amount (if any) Das should report as a liability at the end of the year. Note: Enter your answers in whole dollars. Debit Beginning Balance Actual expenditures Ending Balance Answer is not complete. Warranty Liability 0 -11,750 38,750 → 27,000 0 -27,000 Credit Warranty expense
Early in 2020, Kingbird Equipment Company sold 600 Rollomatics at $5,400 each. During 2020, Kingbird spent $21,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All sales transactions are on a cash basis. (a) Your Answer Correct Answer (Used) Your answer is partially correct. Prepare 2020 entries for Kingbird. Assume that Kingbird estimates the total cost of servicing the warranties in the second year will be $31,000. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit At Sale cash 3240000 Sales Revenue 32 During 2020 Warranty Expense 21000 Unearned Warranty Revenue Dec. 31, 2020 Warranty Expense 31000
69. Jackal Company's (a monthly depositor) tax liability (amount withheld from employees' wages for federal income tax and FICA tax plus the company's portion of the FICA tax) for July was $2,780. No deposit was made by the company until August 22, 20-- (7 days late). Determine the following: A. The date by which the deposit should have been made B. The penalty for failure to make timely deposit C. The penalty for failure to fully pay tax when due D. The interest on taxes due and unpaid (assume a 5% interest rate)
On December 31, 2023, Sablok Company sells production equipment to Tang Inc. for $50,000. Sablok includes a one-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2023. Sablok estimates the prices to be $48,800 for the equipment and $1,200 for the cost of warranty. Instructions Are the sale of the equipment and the warranty separate performance obligations within the contract? Explain. Prepare a single compound journal entry to record this transaction on December 31, 2024. Ignore any related cost of goods sold entry. Repeat the requirements for part (b), assuming that, in addition to the assurance warranty, Sablok sold an extended warranty (service-type warranty) for an additional two years (2024–2025) for $800. (Hint: Use unearned revenue).