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

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93. Martok Company sells personal computers for $2,300 each. The price includes a two-year warranty. During 2015, the company sells 400 computers. On the basis of past experience, the warranty costs are estimated to be $250 per computer. The actual warranty costs paid by Martok during 2015 were $65,000. Prepare general journal entries to record the estimated warranty expense and the warranty payments during 2015.
Lachgar Industries warrants its products for one year. The estimated product warranty is 4% of sales. Assume that sales were $210,000 for June. In July, a customer received warranty repairs requiring $140 of parts and $95 of labor. a. Journalize the adjusting entry required at June 30, the end of the first month of the current fiscal year, to record the accrued product warranty. b. Journalize the entry to record the warranty work provided in July.
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?
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?
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
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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?
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Grouper Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first year after sale-3% of sales; second year after sale-4% of sales; and third year after sale-5% of sales. Sales and actual warranty expenditures for the first three years of business were: Sales Warranty Expenditures 2021 $870,000 $17,100 2022 1,010,000 48,400 2023 1,041,000 80,000 (a) Calculate the amount that Grouper should report as warranty expense on its 2023 income statement and as a warranty liability on its December 31, 2023 SFP using the assurance-type warranty (expense-based approach). Assume that all sales are made evenly throughout each year and that warranty expenditures are also evenly spaced according to the rates above. Warranty expense $ Warranty liability $
During 2020, Buenas 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 Expenditures P5,000,000 P150,000 6,000,000 550,000 At December 31, 2021, what would be reported as estimated warranty liability? a. P360,000 b. P400,000 c. P240,000 d. P50,000