Gross sales of components for the first six months of 2021were:MonthAmountMonthAmountJanuaryFebruaryMarch4,200,0004,700,0003,900,000AprilMayJune3,250,0002,400,0001,900,000The warranty also covers the payment of freight cost ondefective components returned and on the new componentssent out as replacements.The freight cost runs approximately 5% of the sales price ofthe components returned.The manufacturing cost of the components is roughly 70% ofsales price, and the salvage value of returned componentsaverages 10% of their sales price.Returned components on hand on January 1, 2021 were thusvalued in inventory at 10% of their original sales price.Required:1. Determine the estimated sales returns subsequent toJune 30, 2021.2. Determine the required estimated warranty liability onJune 30, 2021.3. Prepare the adjustment of the estimated warrantyliability on June 30, 2021. Dawson Company manufactures television components andsells them with a 6-month warranty under which defectivecomponents will be replaced without charge.On January 1, 2021, the warranty liability had a balance esP620,000.By June 30, 2021, the warranty liability on January 1, 2021had been reduced to P120,400 by debits for estimated netcost of components returned that had been sold in 2020The entity started out in 2021 expecting 7% of sales to bereturned. However, due to the introduction of new modelsduring the year, this estimated percentage of returns wasincreased to 10% on May 1.It is assumed that no components sold during a given monthare returned in that month.Each component is stamped with a date at time of sale sothat the warranty may be properly administered.The following table of percentages indicates the likelypattern of sales returns during the 6-month period of thewarranty, starting with the month following the sale ofcomponents.Percentage of totalreturns expectedMonth following saleFirstSecondThirdFourth through sixth - 10% each month30%202030100%

Sales Return - A sales return is merchandise sent back by a purchaser to the vendor. The return is…

Gross sales of components for the first six months of 2021. were: Month Amount Month Amount January February March 4,200,000 4,700,000 3,900,000 April May June 3,250,000 2,400,000 1,900,000 The warranty also covers the payment of freight cost on defective components returned and on the new components sent out as replacements. The freight cost runs approximately 5% of the sales price of the components returned. The manufacturing cost of the components is roughly 70% of sales price, and the salvage value of returned components averages 10% of their sales price. Returned components on hand on January 1, 2021 were thus valued in inventory at 10% of their original sales price. Required: 1. Determine the estimated sales returns subsequent to June 30, 2021. 2. Determine the required estimated warranty liability on June 30, 2021. 3. Prepare the adjustment of the estimated warranty liability on June 30, 2021.

Gross sales of components for the first six months of 2021. were: Month Amount Month Amount January February March 4,200,000 4,700,000 3,900,000 April May June 3,250,000 2,400,000 1,900,000 The warranty also covers the payment of freight cost on defective components returned and on the new components sent out as replacements. The freight cost runs approximately 5% of the sales price of the components returned. The manufacturing cost of the components is roughly 70% of sales price, and the salvage value of returned components averages 10% of their sales price. Returned components on hand on January 1, 2021 were thus valued in inventory at 10% of their original sales price. Required: 1. Determine the estimated sales returns subsequent to June 30, 2021. 2. Determine the required estimated warranty liability on June 30, 2021. 3. Prepare the adjustment of the estimated warranty liability on June 30, 2021.

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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