MapsDuring 2005, Cory Company introduced a new line of machines that carrya two-year warranty against manufacturer's defects. Based on industryexperience, the estimated warranty costs related to peso sales are asfollows:Year of sale4%Year after sale6%Sales and actual warranty expenditures for the years ended December 31,2005 and 2006 were as follows:Actual warrantySalesexpenditures20052006500,000700,000P 15,00047,000Pl,200,000P 62,000What amount should Cory report as its estimated warranty liability atDecember 31, 2006?POb. P16,000c. P42,000d. P58,0002.

The warranty Expenses is recognized and recorded at the time when the sales are made.

Answered: During 2005, Cory Company introduced a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Kk25.
! Required information [The following information applies to the questions displayed below.] On October 29, Lobo Company began operations by purchasing razors for resale. The razors have a 90-day warranty. When a razor is returned, the company discards it and malls a new one from Merchandise Inventory to the customer. The company's cost per new razor is $16 and its retail selling price is $80. The company expects warranty costs to equal 8% of dollar sales. The following transactions occurred. November 11 Sold 80 razors for $6,400 cash. November 30 December 9 December 16 December 29 December 31 January 5 January 17 January 31 View transaction list Recognized warranty expense related to November sales with an adjusting entry. Replaced 16 razors that were returned under the warranty. Sold 240 razors for $19,200 cash. Replaced 32 razors that were returned under the warranty. Recognized warranty expense related to December sales with an adjusting entry. Sold 160 razors for $12,800 cash.…
3
Product A comes with a two year warranty when purchased by customers. The estimated warranty costs as a percentage of dollar sales are 3% in the year of sale and 5% in the second year after the sale. The following information relates to sales and warranty expenditures of Product A Actual warranty expenditures $ 10,000 $ 35,000 Year Year 1 Year 2 Sales $400,000 $500,000 Which of the following is NOT part of the required journal entry in Year 1 based on the above information? Multiple Choice Credit cash $10,000 Debit warranty expense $12,000 None of the other alternatives are correct Debit warranty expense $32,000 Credit sales $400,000
EZ Wheels Corporation manufactures kick scooters. The company offers a one-year warranty on all scooters. During the year, the company recorded net sales of $2,850 million. Historically, about 4% of all sales are returned under warranty and the cost of repairing and or replacing goods under warranty is about 30% of retail value. Assume that at the start of the year EZ Wheels’ balance sheet included an accrued warranty liability of $24.5 million and at the end of the year, the accrued warranty liability balance was $18.6 million. How much did EZ Wheels pay during the year to repair and/or replace scooters under warranty? Select one: a. None of these are correct. b. $40.1 million c. $34.2 million d. $114.0 million e. $18.6 million
Pinnacle Co., prepares quarterly interim financial reports. The entity sells electric fans and normally 5% of their customers claim on their warranty. The provision in the first quarter was calculated at 5% of sales to date which amounted to 20,000,000. However, in the second quarter, a design fault was found and warranty claims were expected to be 10% for the whole year. Sales for the second quarter amounted to P30,000,000. What amount of provision should be charged in the interim income statement for the first quarter? A. 2,500,000B. 3,750,000C. 1,500,000D. 1,000,000
Denger
Sellers Computer is a leader in the computer industry with over $59 billion in sales each year. A recent annual report for Sellers contained the following note: Warranty We record warranty liabilities at the time of sale for the estimated costs that may be incurred under our limited warranty. Factors that affect our warranty liability include the number of installed units currently under warranty, historical and anticipated rates of warranty claims on those units, and cost per claim to satisfy our warranty obligation. Required: 1. Assume that estimated warranty costs for the current year are $500.7 million and that $414.6 million of warranty work was performed during the year. Provide the journal entries required to recognize warranty expense and the warranty services provided during the year. Assume that all warranty services were paid for with cash. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in…
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
10.Pirates PLC sells a line of goods under a six-month warranty. Any defect arising during that period is repaired free of charge. Pirates PLC 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 millionThe 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? Select one alternative: O $1.6 million O $6 million O $2 million O $0.6 million
1. General Motors guarantees automobiles against defects for five years or 160,000 km, whichever comes first. Suppose GM can expect warranty costs during the five-year period to add up to 4% of sales. Assume that Forbes Motors made sales of $2,500,000 on their Buick line during 2020. Forbes received cash for 13% of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totalled $75,000 during 2020. Post to the Estimated Warranty Payable T-account. The beginning balance was $43,000. At the end of 2020, how much in estimated warranty payable does Forbes owe its customers?
4

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS