Karma Company sells televisions at an average price of P7,500 and also offers to each customer a separate 3-year warranty contract for P750 that requires the company to perform periodic services and to replace defective parts. During 2016, the company sold 300 televisions and 270 warranty contracts for cash. It estimates the 3-year warranty costs as P200 for parts and P400 for labor and accounts for warranties separately. Assume sales occurred on December 31, 2018, income is recognized on the warranties, and straight line recognition of warranty revenues occurs. What amount of current and non-current liability relative to warranty revenue would appear on the December 31, 2019 balance sheet, respectively? Select the correct response: O and 202,500 202,500 and 0 135,000 and 67,500 67,500 and 135,000

Karma Company sells televisions at an average price of P7,500 and also offers to each customer a separate 3-year warranty contract for P750 that requires the company to perform periodic services and to replace defective parts. During 2016, the company sold 300 televisions and 270 warranty contracts for cash. It estimates the 3-year warranty costs as P200 for parts and P400 for labor and accounts for warranties separately. Assume sales occurred on December 31, 2018, income is recognized on the warranties, and straight line recognition of warranty revenues occurs. What amount of current and non-current liability relative to warranty revenue would appear on the December 31, 2019 balance sheet, respectively? Select the correct response: O and 202,500 202,500 and 0 135,000 and 67,500 67,500 and 135,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Wally Co. began selling merchandise on November 1, 2022. The company offers a 50-day warranty for defective merchandise. Based on prior experience with similar merchandise, Wally Co. predicts that 2.80% of the units sold will encounter a fault within the warranty period, with a replacement or repair of a damaged unit costing an average of $30. In November, Wally Co. sold 25,000 units and 400 defective units were returned. In December, Wally Co. sold 32,000 units and 544 defective units were returned. The actual cost of replacing the defective units was $38,500. Prepare a journal entry to accrue for the estimated warranty costs for the November and December sales at December 31, 2022. Prepare one summary journal entry at December 31, 2022, to record the cost of replacing the defective merchandise returned during November and December. What amounts will be included in Wally Co.’s 2022 income statement and balance sheet at December 31, 2022, with regard to the warranty? Show steps…
Hansaben
Sanaz Corporation sells computers under a 3-year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2020, the corporation sells for cash 700 computers at a unit price of $2,000. On the basis of past experience, the3-year warranty costs are estimated to be $130 for parts and $170 for labor per unit.(For simplicity, assume that all sales occurred on December 31, 2020.) The warranty is not sold separately from the computer. Required a. Record any necessary journal entries in 2020.b. What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified?c. In 2021, the actual warranty costs to Sanaz Corporation were $30,500 for parts and $45,100 for labor. Record any necessary journal entries in 2021
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…
Early in 2020, Larkspur Equipment Company sold 600 Rollomatics at $5,800 each. During 2020, Larkspur spent $21,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All sales transactions are on a cash basis. Prepare 2020 entries for Larkspur assuming that the warranties are not an integral part of the sale (a service-type warranty). Assume that of the sales total, $58,000 relates to sales of warranty contracts.Warranty costs incurred in 2020 were $21,000. Estimate revenues to be recognized on a straight-line basis. Date Account Titles and Explanation Debit Credit