Hazel Gird's products come with a one-year warranty. In 2014, sales totaled 2,500 units. It is expected that warranty repairs will average 10 per unit sold, with 30 percent of repairs completed in 2014 and 70 percent completed in 2015. How much warranty expense should Searches include in its 2014 income statement? Show solution.

Hazel Gird's products come with a one-year warranty. In 2014, sales totaled 2,500 units. It is expected that warranty repairs will average 10 per unit sold, with 30 percent of repairs completed in 2014 and 70 percent completed in 2015. How much warranty expense should Searches include in its 2014 income statement? Show solution.

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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Sunnyvale Computer Company sells a line of computers that carry a six-month warranty. Customers are offered the opportunity to buy a two-year extended warranty for an additional charge. During 2024, Sunnyvale received $328,000 from customers for these extended warranties. All sales are on credit, and funds are received evenly throughout the year and the warranties go into effect immediately after purchase. Required: Prepare a summary journal entry to record sales of the extended warranties. Also prepare any other entries associated with the warranties that should be recorded during 2024. 1. Record the $328,000 sale of the extended warranties. 2.Record the recognition of revenue from extended warranties for the year ending December 31, 2024.
Smith Electic (SE) owed Estimated Warranty Payable of $1,100 at the end of 2023. During 2024, SE made sales of $100,000 and expects product warranties to cost the company 5% of the sales. During 2024, SE paid $2,600 for warranties. What is SE's Estimated Warranty Payable at the end of 2024? OA. $2,600 OB. $5,000 O C. $6,100 OD. $3,500
! Required information [The following information applies to the questions displayed below.] On October 29, Lobo Company began operations by purchasing razors for resale. The razors have a 90-day warranty. When a razor is returned, the company discards it and malls a new one from Merchandise Inventory to the customer. The company's cost per new razor is $16 and its retail selling price is $80. The company expects warranty costs to equal 8% of dollar sales. The following transactions occurred. November 11 Sold 80 razors for $6,400 cash. November 30 December 9 December 16 December 29 December 31 January 5 January 17 January 31 View transaction list Recognized warranty expense related to November sales with an adjusting entry. Replaced 16 razors that were returned under the warranty. Sold 240 razors for $19,200 cash. Replaced 32 razors that were returned under the warranty. Recognized warranty expense related to December sales with an adjusting entry. Sold 160 razors for $12,800 cash.…
Sellers Computer is a leader in the computer industry with over $59 billion in sales each year. A recent annual report for Sellers contained the following note: Warranty We record warranty liabilities at the time of sale for the estimated costs that may be incurred under our limited warranty. Factors that affect our warranty liability include the number of installed units currently under warranty, historical and anticipated rates of warranty claims on those units, and cost per claim to satisfy our warranty obligation. Required: 1. Assume that estimated warranty costs for the current year are $500.7 million and that $414.6 million of warranty work was performed during the year. Provide the journal entries required to recognize warranty expense and the warranty services provided during the year. Assume that all warranty services were paid for with cash. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in…
Oak Co. offers a three-year warranty on its products. Oak previously estimated warranty costs to be 2% of sales. Due to atechnological advance in production at the beginning of 2010, Oak now believes 1% of sales to be a better estimate of warranty costs. Warranty costs of 80,000 and 96,000 were reported in 2008 and 2009, respectively. Sales for 2010 were 5,000,000. What amount should be disclosed in Oak’s 2010 financial statements as warranty expense?a. 50,000b. 88,000c. 100,000d. 138,000
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
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Required:1. Prepare the adjustment to correct the estimated warranty liability on December 31, 2022.