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During Year 1, Ward Company introduced a new product carrying a two-year warranty against defects, which is included in the selling price of the product. The estimated warranty costs are 2% of sales within the first 12 months following the sale and 4% in the second 12 months following the sale. Sales and actual warranty expenditures for the years ended December 31 of Year 1 and Year 2 follow. Sales Year $960.000 Year: 1.600.000 $1.600.000 Dec 31 Year T Actual Warranty Expenditures Required a. Record the entries in Year 1 to (1) record actual cash warranty costs and (2) accrue for warranties at year-end. Date Account Name Dr. Cr. Dec 31 Year 1 STCW $14400 48.000 $39.000 Dec 31 Year 2 Totalwarranty CRISE To accufar warranty b. At December 31 Year 1, what would Ward report as estimated warranty liability on its balance sheet? s c. Record the entries in Year 2 to (1) record actual cash warranty costs and (2) accrue for warranties at year-end. Date Account Name Cr. Dec 31 Year To record actual warranty costs V V To assove forwarrac d. At December 31 Year 2, what would Ward report as estimated warranty liability on its balance sheet? s

During Year 1, Ward Company introduced a new product carrying a two-year warranty against defects, which is included in the selling price of the product. The estimated warranty costs are 2% of sales within the first 12 months following the sale and 4% in the second 12 months following the sale. Sales and actual warranty expenditures for the years ended December 31 of Year 1 and Year 2 follow. Sales Year $960.000 Year: 1.600.000 $1.600.000 Dec 31 Year T Actual Warranty Expenditures Required a. Record the entries in Year 1 to (1) record actual cash warranty costs and (2) accrue for warranties at year-end. Date Account Name Dr. Cr. Dec 31 Year 1 STCW $14400 48.000 $39.000 Dec 31 Year 2 Totalwarranty CRISE To accufar warranty b. At December 31 Year 1, what would Ward report as estimated warranty liability on its balance sheet? s c. Record the entries in Year 2 to (1) record actual cash warranty costs and (2) accrue for warranties at year-end. Date Account Name Cr. Dec 31 Year To record actual warranty costs V V To assove forwarrac d. At December 31 Year 2, what would Ward report as estimated warranty liability on its balance sheet? s

FINANCIAL ACCOUNTING
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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Recording and Reporting Warranties During Year 1, Ward Company introduced a new product carrying a two-year warranty against defects, which is included in the selling price of the product. The estimated warranty costs are 2% of sales within the first 12 months following the sale and 4% in the second 12 months following the sale. Sales and actual warranty expenditures for the years ended December 31 of Year 1 and Year 2 follow. Sales Year $960,000 Year 2 1,600,000 $1,600,000 Date a. Dec. 31 Year 1 Required a. Record the entries in Year 1 to (1) record actual cash warranty costs and (2) accrue for warranties at year-end. Account Name Cr. Dec. 31 Year 1 Actual Warranty Expenditures $14,400 48,000 $39.000 Dec. 31 Year 2 To record actual warranty costs. To accrue for warranty expense. b. At December 31 Year 1, what would Ward report as estimated warranty liability on its balance sheet? $ c. Record the entries in Year 2 to (1) record actual cash warranty costs and (2) accrue for warranties at year-end. Date Account Name Dr Cr. Dec. 31 Year 2 To record actual warranty costs. V To accrue for warranty expense. Dr. d. At December 31 Year 2, what would Ward report as estimated warranty liability on its balance sheet? $
Transcribed Image Text:Recording and Reporting Warranties During Year 1, Ward Company introduced a new product carrying a two-year warranty against defects, which is included in the selling price of the product. The estimated warranty costs are 2% of sales within the first 12 months following the sale and 4% in the second 12 months following the sale. Sales and actual warranty expenditures for the years ended December 31 of Year 1 and Year 2 follow. Sales Year $960,000 Year 2 1,600,000 $1,600,000 Date a. Dec. 31 Year 1 Required a. Record the entries in Year 1 to (1) record actual cash warranty costs and (2) accrue for warranties at year-end. Account Name Cr. Dec. 31 Year 1 Actual Warranty Expenditures $14,400 48,000 $39.000 Dec. 31 Year 2 To record actual warranty costs. To accrue for warranty expense. b. At December 31 Year 1, what would Ward report as estimated warranty liability on its balance sheet? $ c. Record the entries in Year 2 to (1) record actual cash warranty costs and (2) accrue for warranties at year-end. Date Account Name Dr Cr. Dec. 31 Year 2 To record actual warranty costs. V To accrue for warranty expense. Dr. d. At December 31 Year 2, what would Ward report as estimated warranty liability on its balance sheet? $
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