Computer Wholesalers restores and resells notebook computers. It originally acquires the notebook computers from corporations upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against defects. Based on previous experience, Computer Wholesalers expects warranty costs to be approximately 5% of sales. Sales for the month of December are $450,000. Actual warranty expenditures in January of the following year were $15,500. Required: 1. Does this situation represent a contingent liability? 2. & 3. Record the necessary entries in the Journal Entry Worksheet below. 4. What is the balance in the Warranty Liability account after the entries in Parts 2 and 3? Complete this question by entering your answers in the tabs below. Req 1 Req 2 and 3 Req 4 Does this situation represent a contingent liability? Does this situation represent a contingent liability? Yes
Computer Wholesalers restores and resells notebook computers. It originally acquires the notebook computers from corporations upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against defects. Based on previous experience, Computer Wholesalers expects warranty costs to be approximately 5% of sales. Sales for the month of December are $450,000. Actual warranty expenditures in January of the following year were $15,500. Required: 1. Does this situation represent a contingent liability? 2. & 3. Record the necessary entries in the Journal Entry Worksheet below. 4. What is the balance in the Warranty Liability account after the entries in Parts 2 and 3? Complete this question by entering your answers in the tabs below. Req 1 Req 2 and 3 Req 4 Does this situation represent a contingent liability? Does this situation represent a contingent liability? Yes
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Computer Wholesalers restores and resells notebook computers. It originally acquires the notebook computers from corporations
upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against defects. Based on previous
experience, Computer Wholesalers expects warranty costs to be approximately 5% of sales. Sales for the month of December are
$450,000. Actual warranty expenditures in January of the following year were $15,500.
Required:
1. Does this situation represent a contingent liability?
2. & 3. Record the necessary entries in the Journal Entry Worksheet below.
4. What is the balance in the Warranty Liability account after the entries in Parts 2 and 3?
Complete this question by entering your answers in the tabs below.
Req 1
Req 2 and 3
Req 4
Does this situation represent a contingent liability?
Does this situation represent a contingent liability?
Yes
< Req 1
Req 2 and 3 >
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