Habek Hardware Inc. provides a product warranty for defects on two major lines of items sold since the begin- ning of 2019. Line A carries a two-year warranty for all labor and service (but not parts). The company contracts the service for the warranty (both parts and labor). The fee is $60 per unit payable at the date of sale. Line B carries a three-year warranty for parts and labor on service. Habek purchases the parts needed under the warranty and has service personnel who perform the work and are paid by the job. On the basis of experience, it is estimated that for Line B, the three-year warranty costs are 3% of sales for parts and 7% for labor and overhead. Additional data follow. Sales in units, Line A ... Sales price per unit, Line A. Sales in units, Line B Sales price per unit, Line B.. Actual warranty outlays, Line B: Parts .... Labor and overhead 2019 2020 700 $ 610 600 $ 700 $ 750 $3,000 $7,000 1,000 $ 660 800 $ 9,600 $22,000 Required a. Provide entries for annual sales and expenses for 2019 and 2020 separately by product line. Assume that all sales were for cash. b. Determine the year-end estimated warranty liability and the year's warranty expense for 2019 and 2020.
Habek Hardware Inc. provides a product warranty for defects on two major lines of items sold since the begin- ning of 2019. Line A carries a two-year warranty for all labor and service (but not parts). The company contracts the service for the warranty (both parts and labor). The fee is $60 per unit payable at the date of sale. Line B carries a three-year warranty for parts and labor on service. Habek purchases the parts needed under the warranty and has service personnel who perform the work and are paid by the job. On the basis of experience, it is estimated that for Line B, the three-year warranty costs are 3% of sales for parts and 7% for labor and overhead. Additional data follow. Sales in units, Line A ... Sales price per unit, Line A. Sales in units, Line B Sales price per unit, Line B.. Actual warranty outlays, Line B: Parts .... Labor and overhead 2019 2020 700 $ 610 600 $ 700 $ 750 $3,000 $7,000 1,000 $ 660 800 $ 9,600 $22,000 Required a. Provide entries for annual sales and expenses for 2019 and 2020 separately by product line. Assume that all sales were for cash. b. Determine the year-end estimated warranty liability and the year's warranty expense for 2019 and 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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