During 2017, Alaa Company sold 600 TV for $500 each. The sold items include a one-year warranty. The manager estimated that 5% of these TVs will be defective and the warranty repair cost is $40 per TV. In 2017, Alaa honors warranty contracts for 12 TVs. During the first month of 2018, the company honors warranty contracts for 3 TVs. The adjusting entry to accrue the estimated warranty costs is: * Debit Warranty Expense $15,000 Credit Warranty Liability $15,000 Debit Warranty Expense $1,200 Credit Warranty Liability $1,200 Debit Warranty Liability $1,200 Credit Warranty Expense $1,200 Debit Warranty Liability $480 Credit Cash $480 None of the above

During 2017, Alaa Company sold 600 TV for $500 each. The sold items include a one-year warranty. The manager estimated that 5% of these TVs will be defective and the warranty repair cost is $40 per TV. In 2017, Alaa honors warranty contracts for 12 TVs. During the first month of 2018, the company honors warranty contracts for 3 TVs. The adjusting entry to accrue the estimated warranty costs is: * Debit Warranty Expense $15,000 Credit Warranty Liability $15,000 Debit Warranty Expense $1,200 Credit Warranty Liability $1,200 Debit Warranty Liability $1,200 Credit Warranty Expense $1,200 Debit Warranty Liability $480 Credit Cash $480 None of the above

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

During December, Maxum Company sold 3,900 units of a product that carries a 60-day warranty. December sales for this product total $127,000. The company expects 6% of the units to need warranty repairs, and it estimates the average repair cost per unit will be $19. Record the related adjusting entry.
Cupola Awning Corporation introduced a new line of commercial awnings in 2024 that carry a two-year warranty against manufacturer’s defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales Actual Warranty Expenditures $ 5,000,000 $ 37,500 Required: Does this situation represent a loss contingency? Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of the warranty that should be recorded during 2024. What amount should Cupola report as a liability at December 31, 2024?
ABC Inc. sells medical equipment. ABC provides its customers anoption to purchase a three-year warranty. Warranty contracts sold on 2021, 2022 and2023 are P720,000, 864,000 and 1,004,000, respectively. Management expects that:20% of warranty costs are done in the 1st year from the date of sale.30% of warranty costs are done in the 2nd year from the date of sale.50% of warranty costs are done in the 3rd year from the date of sale.Actual costs incurred on repairs are P25,000, 100,000 and 200,000, respectively.What amount should be reported as liability on warranties on December 31, 2021, 2022and 2023?
Gen sells cellular phones. Each phone sells for P10,000 and carries a warranty against defects of period of 1 year counting from the date of purchase. The firm sold 60,000 phones in 2019. Past experience indicates that 10% of the phones will need some type of repair during the warranty period. In the past, the firm has incurred expenditures at P400 on each telephone needing repair due to manufacturing defects. At the beginning of the year, the Estimate Liability for Warranties account had a credit of P59,400. Actual expenditures during the year amounted to P1.5M. The balance of the Estimated Liability for Warranties at year-end is: O 500,000 O 2,400,000 O 1,500,000 0 950,000
EZ Wheels Corporation manufactures kick scooters. The company offers a one-year warranty on all scooters. During 2017, the company recorded net sales of $1,900 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 $16.3 million and at the end of the year, the accrued warranty liability balance was $12.4 million. How much did EZ Wheels pay during the year to repair and/or replace scooters under warranty? this seems like the same question is it not 22.8?
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
Fitzpatrick Co. sold $391,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 3% of the sales price. On August 15, a customer required a $110 part replacement plus $55 of labor under the warranty. Required: Provide the journal entry for (a) the estimated warranty expense on January 31 for January sales on page 10 of the journal and (b) the August 15 warranty work on page 14 of the journal. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
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
Adams, Inc. sells widgets that come with an unconditional five-year warranty. According to Adams' best estimates, 7.8% of all units sold will require repair or replacement under that warranty, and the average cost of honoring one warranty claim is $60. During 2023, Adams' first year of operations, 176,000 widgets were sold, 1,278 of which were repaired or replaced under warranty claims. On its December 31, 2023 balance sheet, what amount of warranty liability will Adams report?
Catskills guarantees its snowmobiles for three years. Company experience indicates that warranty costs will be approximately 7% of sales. Assume that the Catskills dealer in Colorado Springs made sales totaling $450,000 during 2018. The company received cash for 10% of the sales and notes receivable for the remainder. Warranty payments totaled$12,000 during 2018. Requirements: 1. Record the sales, warranty expense, and warranty payments for the company. Ignore cost of goods sold. 2. Assume the Estimated Warranty Payable is $0 on January 1, 20182018. Post the 2018transactions to the Estimated Warranty Payable T-account. At the end of 2018,how much in Estimated Warranty Payable does the company owe?
4. Bonita.com sells 6800 units of its product for $460 each. The selling price includes a one- year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $40 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $4800. What amount should Bonita.com accrue on December 31 for estimated warranty costs? Select answer from the options below a. $8160 b. $32640 c. $ 4800 d. $3360