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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please help me
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? $
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
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,
Accounting
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