During 2011, Rex Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales are P6,000,000 for 2011 and P10,000,000 for 2012. Actual warranty expenditures are P90,000 for 2011 and P300,000 for 2012. On December 31, 2012, what is the estimated warranty liability? a. 570,000 b. 100,000 450.000

During 2011, Rex Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales are P6,000,000 for 2011 and P10,000,000 for 2012. Actual warranty expenditures are P90,000 for 2011 and P300,000 for 2012. On December 31, 2012, what is the estimated warranty liability? a. 570,000 b. 100,000 450.000

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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Riverbed Appliances provides a 3-year warranty with one of its products, which was first sold in 2017. Riverbed sold $1,800,000 of products subject to the warranty. Riverbed expects $198,000 of warranty costs over the next 3 years. In 2017, Riverbed spent $104,000 servicing warranty claims.Prepare Riverbed’s journal entries to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs; Riverbed now expects future warranty costs of $113,000.
Kiner Equipment Company sells computers for P2,000 each and also gives cach customer a 2-year warranty. During 2004, the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as P40 for parts and P80 for labor. (Assume all sales occur at December 31, 2004 and warranty obligations are expected to be settled evenly throughout the warranty period.) In 2005, Kiner incurred actual warranty costs relative to 2004 computer sales of P10,000 for parts and 24,000 for labor. Requirements: a. The transactions of part (a) create what balance under current liabilities in the 2004 balance sheet?
During 2020, Red Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 4% within 12 months following sale and 6% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2020 and 2021 are as follows: Sales Actual Expenditures2020 P5,000,000 P150,0002021 6,000,000 550,000At December 31, 2021, what would be reported as estimated warranty liability?a. P360,000 b. P400,000 c. P240,000 d. P50,000
On January 1, 2021, ACORN Company offered a three-year warranty from date of sale on any of its products sold after that date. The offer was part of a program to increase sales. Meeting the terms of the warranty was expected to cost 2% of sales. Sales made under warranty in 2021 amounted to ₱9,000,000. One fifth of the units sold in 2021 were returned. These units were repaired or replaced at a cost of ₱32,500. What amount of warranty expense should be shown on ACORN’s 2021 income statement? A. ₱ 35,500 B. ₱ 68,500 C. ₱ 32,500 D. ₱ 180,000
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?
In 2019, Shiftry Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows: First year of warranty 2% Second year of warranty 5% Sales and actual expenditures for 2019 and 2020 are presented below: 2019 2020 Sales 450,000 600,000 Actual warranty expenditures 15,000 30,000 What is the estimated warranty liability at the end of 2020?
In 20X1, Stevens Corp. began a new product line of wearable technology that carries a 24-month warranty against manufacturer defects. Based on industry experience, Stevens expects warranty costs to be an amount equal to approximately 9% of total sales dollars. During 20X1, new sales of this technology totaled $3,000,000. The costs incurred to satisfy warranty claims in 20X1 was $90,000. Required: Answer the following two questions. Question #1: What should Stevens report as the "Warranty Expense" balance on its 20X1 income statement?Answer: Question #2: What should Stevens report as the "Warranty Liability" balance on its balance sheet at 12/31/X1?Answer
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On September 1, 2019, Carolina Electronics Company has 1,160 Blu-ray players ready for sale. On October 1, 2019, 810 are sold, on account, at $135 each with a 1-year assurance-type warranty. Carolina estimates that the warranty cost on each Blu-ray player sold will probably average $8 per unit. During the final 3 months of 2019, Carolina incurred warranty costs of $3,300, and in 2020 warranty costs were $3,180. Required: 1. Prepare the journal entries for the preceding transactions. 2. Show how the preceding items would be reported on the December 31, 2019, balance sheet. 3. Prepare the journal entries for the preceding transactions using the modified cash basis method. 4. Next Level Which method produces the better measure of income? Why?
Pearl Factory provides a 2-year warranty with one of its products which was first sold in 2025. Pearl sold $1,077,700 of products subject to the warranty. Pearl expects $123,000 of warranty costs over the next 2 years. In that year, Pearl spent $63,400 servicing warranty claims. Prepare Pearl's journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs. (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. List all debit entries before credit entries.) Date Account Titles and Explanation During 2025 12/31/25 Warranty Liability Warranty Expense (To record payment for warranty costs incurred) Warranty Expense Inventory (To record sales) Warranty Expense Warranty Liability Debit 123000 63400 59600 Credit 123000 63400 59600
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?
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