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: Warranty Sales 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

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: Warranty Sales 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

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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Puzzles Company sells merchandise with a 1-year warranty. In Year 1, sales consisted of 3,700 units. It is estimated that warranty repairs will average $16 per unit sold, and 40% of the repairs will be made in Year 1 and 60% in Year 2. In the income statement for Year 1, Puzzles Company should show warranty expense of a. $35,520. b. $23,680. c. $0. d. $59,200.
Concord 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-2% 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 $750,000 $ 15,900 2022 1,010,000 46, 000 2023 1,017, 000 80,000 (a) Calculate the amount that Concord 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
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Product A comes with a two year warranty when purchased by customers. The estimated warranty costs as a percentage of dollar sales are 3% in the year of sale and 5% in the second year after the sale. The following information relates to sales and warranty expenditures of Product A Actual warranty expenditures $ 10,000 $ 35,000 Year Year 1 Year 2 Sales $400,000 $500,000 Which of the following is NOT part of the required journal entry in Year 1 based on the above information? Multiple Choice Credit cash $10,000 Debit warranty expense $12,000 None of the other alternatives are correct Debit warranty expense $32,000 Credit sales $400,000
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EZ Wheels Corporation manufactures kick scooters. The company offers a one-year warranty on all scooters. During the year, the company recorded net sales of $2,850 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 $24.5 million and at the end of the year, the accrued warranty liability balance was $18.6 million. How much did EZ Wheels pay during the year to repair and/or replace scooters under warranty? Select one: a. None of these are correct. b. $40.1 million c. $34.2 million d. $114.0 million e. $18.6 million
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?
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Carla Vista Resellers Ltd. (CVRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $36,480, of which $24,000 had been incurred before year end ($18,240 on replacement appliances and $5,760 for parts). For an additional charge of $144, CVRL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2024, CVRL sold 480 three-year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $14,400. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $43,200, which it…
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
1. General Motors guarantees automobiles against defects for five years or 160,000 km, whichever comes first. Suppose GM can expect warranty costs during the five-year period to add up to 4% of sales. Assume that Forbes Motors made sales of $2,500,000 on their Buick line during 2020. Forbes received cash for 13% of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totalled $75,000 during 2020. Post to the Estimated Warranty Payable T-account. The beginning balance was $43,000. At the end of 2020, how much in estimated warranty payable does Forbes owe its customers?