In 2018, Dubious company began selling new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows: First year of warranty 2% 2nd year of warranty 5% Sales and actual

In 2018, Dubious company began selling new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows: First year of warranty 2% 2nd year of warranty 5% Sales and actual

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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2) Over the past 4 years, Matador has estimated warranty expense based on 3.5% of sales. On May 1, 2022, after reviewing its most recent year end number for actual warranties paid, it decided to change this estimate to 4.75%. If Matador had used the 4.75% in the past, warranty expenses would be $150,000 higher in prior years. During fiscal 2022, Matador had earned sales revenues of $2,750,000 of which 20% were cash sales and 80% were credit sales. The bookkeeper calculated warranty expenses for 2022 using the 3.5%. Round answer to nearest whole dollar. Determine the adjustment to ICO. Matador has a corporate tax rate of 30%.
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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
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
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
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
Catskills guarantees its snowmobiles for three years. Company experience indicates that warranty costs will be approximately 7% of sales. Assume that the Catskills dealer in Colorado Springs made sales totaling $450,000 during 2018. The company received cash for 10% of the sales and notes receivable for the remainder. Warranty payments totaled$12,000 during 2018. Requirements: 1. Record the sales, warranty expense, and warranty payments for the company. Ignore cost of goods sold. 2. Assume the Estimated Warranty Payable is $0 on January 1, 20182018. Post the 2018transactions to the Estimated Warranty Payable T-account. At the end of 2018,how much in Estimated Warranty Payable does the company owe?