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Jewellery Limited manufactures and sells different kinds of handmade fine jewellery. The company warrants its products for one year. The average price per piece of jewellery is S5,000 and the company sold 800 products in 2018. By the end of 2018, based on historical information the company estimates 5% of the jewellery sold to develop defective parts within one year. The estimated average cost of warranty repairs per defective item is $100. During 2019, customers have returned 20 pieces of jewellery sold that year for repairs. By the end of 2019, the company expects 7% of the jewellery sold to develop defective parts within one year. The estimated average cost of warranty repairs per defective item is $120. The company sold 900 products in 2019 with the same average price per piece of 5,000. The balance day of Jewellery Limited is 31 December. Required Record the necessary journal entries in 2018 and 2019 regarding the warranty.

Jewellery Limited manufactures and sells different kinds of handmade fine jewellery. The company warrants its products for one year. The average price per piece of jewellery is S5,000 and the company sold 800 products in 2018. By the end of 2018, based on historical information the company estimates 5% of the jewellery sold to develop defective parts within one year. The estimated average cost of warranty repairs per defective item is $100. During 2019, customers have returned 20 pieces of jewellery sold that year for repairs. By the end of 2019, the company expects 7% of the jewellery sold to develop defective parts within one year. The estimated average cost of warranty repairs per defective item is $120. The company sold 900 products in 2019 with the same average price per piece of 5,000. The balance day of Jewellery Limited is 31 December. Required Record the necessary journal entries in 2018 and 2019 regarding the warranty.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Question 2 Jewellery Limited manufactures and sells different kinds of handmade fine jewellery. The company warrants its products for one year. The average price per piece of jewellery is S5,000 and the company sold 800 products in 2018. By the end of 2018, based on historical information the company estimates 5% of the jewellery sold to develop defective parts within one year. The estimated average cost of warranty repairs per defective item is $100. During 2019, customers have returned 20 pieces of jewellery sold that year for repairs. By the end of 2019, the company expects 7% of the jewellery sold to develop defective parts within one year. The estimated average cost of warranty repairs per defective item is $120. The company sold 900 products in 2019 with the same average price per piece of 5,000. The balance day of Jewellery Limited is 31 December. Required Record the necessary journal entries in 2018 and 2019 regarding the warranty. Question 3 Kenz Limited employs its staff on a five-day working week. The weekly salaries is S15,000 and employees are paid in arrears on Friday. That is, when the employees are paid, the salaries paid are for work performed in the preceding week. Kenz Limited retains $5,000 per week to pay the Inland Revenue Department for pay-as-you-carn (PAYE) tax on behalf of the employees and $1,000 per week to pay staff medical benefits. Tax and medical benefits are paid on the following Monday and Tuesday of each week respectively. The end of the reporting period falls on a Wednesday. Required Prepare the accounting entries necessary to record the salary on balance day and its раyments.
Transcribed Image Text:Question 2 Jewellery Limited manufactures and sells different kinds of handmade fine jewellery. The company warrants its products for one year. The average price per piece of jewellery is S5,000 and the company sold 800 products in 2018. By the end of 2018, based on historical information the company estimates 5% of the jewellery sold to develop defective parts within one year. The estimated average cost of warranty repairs per defective item is $100. During 2019, customers have returned 20 pieces of jewellery sold that year for repairs. By the end of 2019, the company expects 7% of the jewellery sold to develop defective parts within one year. The estimated average cost of warranty repairs per defective item is $120. The company sold 900 products in 2019 with the same average price per piece of 5,000. The balance day of Jewellery Limited is 31 December. Required Record the necessary journal entries in 2018 and 2019 regarding the warranty. Question 3 Kenz Limited employs its staff on a five-day working week. The weekly salaries is S15,000 and employees are paid in arrears on Friday. That is, when the employees are paid, the salaries paid are for work performed in the preceding week. Kenz Limited retains $5,000 per week to pay the Inland Revenue Department for pay-as-you-carn (PAYE) tax on behalf of the employees and $1,000 per week to pay staff medical benefits. Tax and medical benefits are paid on the following Monday and Tuesday of each week respectively. The end of the reporting period falls on a Wednesday. Required Prepare the accounting entries necessary to record the salary on balance day and its раyments.
Question 5 Telephone Limited signed a contract with Machinery Leasing Company at 1st January 2020 to lease a machine. The agreement consists in 10 equal annual payments of $300,000 at the beginning of each ycar with an interest rate of 15%. The yearly rental payment includes S30,000 of executory costs related to insurance on the machine. The executory costs of S30,000 are paid to the lessor each year. There is an option to purchase the machine at the end of the lease term for $50,000. The machine has an estimated useful life of 14 years and a guaranteed residual value of $20,000. Both companies adopt straight-line depreciation method for all items of PPE. Consider a PVIF (n=10, i=15%) of 0.2472 and PVIFA (n=10, i=15%) of 5.0188. The balance day for Telephone Limited and Machinery Leasing Company is 31 of December. Required (Round all numbers to the nearest dollar) a) Discuss the nature of this lease to Telephone Limited. b) Discuss the nature of this lease to Machinery Leasing Company. c) Calculate the present value of the minimum lease payment. d) Prepare the journal entries for Telephone Limited in 2020. k) Prepare the journal entries for Machinery Leasing Company in 2020.
Transcribed Image Text:Question 5 Telephone Limited signed a contract with Machinery Leasing Company at 1st January 2020 to lease a machine. The agreement consists in 10 equal annual payments of $300,000 at the beginning of each ycar with an interest rate of 15%. The yearly rental payment includes S30,000 of executory costs related to insurance on the machine. The executory costs of S30,000 are paid to the lessor each year. There is an option to purchase the machine at the end of the lease term for $50,000. The machine has an estimated useful life of 14 years and a guaranteed residual value of $20,000. Both companies adopt straight-line depreciation method for all items of PPE. Consider a PVIF (n=10, i=15%) of 0.2472 and PVIFA (n=10, i=15%) of 5.0188. The balance day for Telephone Limited and Machinery Leasing Company is 31 of December. Required (Round all numbers to the nearest dollar) a) Discuss the nature of this lease to Telephone Limited. b) Discuss the nature of this lease to Machinery Leasing Company. c) Calculate the present value of the minimum lease payment. d) Prepare the journal entries for Telephone Limited in 2020. k) Prepare the journal entries for Machinery Leasing Company in 2020.
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