Nash Company sells a machine for $7,300 with a 12-month warranty agreement that requires the company to replace all defectiveparts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the companysells 480 machines in 2025 (warranty expense is incurred half in 2025 and half in 2026). As a result of product testing, the companyestimates that the total warranty cost is $338 per machine ($148 parts and $190 labor).Assuming that actual warranty costs are incurred exactly as estimated, what journal entries would be made relative to the followingfacts? Use "Inventory" account to record the parts portion of the warranty expense.(a)Sale of machinery and warranty expense incurred in 2025. (If no entry is required, select "No Entry" for the account tities and enter Ofor the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries

Sales revenue= $7,300×480= $3,504,000 Warranty expense= (480×$338)/2= 162,240/2= $81,120 Inventory=…

Answered: Nash Company sells a machine for $7,300…

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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Early in 2020, Cheyenne Equipment Company sold 500 Rollomatics at $5,400each. During 2020, Cheyenne spent $22,000servicing the 2-year assurance warranties that accompany the Rollomatic. All sales transactions are on a cash basis. (a) Prepare 2020 entries for Cheyenne. Assume that Cheyenne estimates the total cost of servicing the warranties in the second year will be $37,000. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit
Adams, Inc. sells widgets that come with an unconditional five-year warranty. According to Adams' best estimates, 7.8% of all units sold will require repair or replacement under that warranty, and the average cost of honoring one warranty claim is $60. During 2023, Adams' first year of operations, 176,000 widgets were sold, 1,278 of which were repaired or replaced under warranty claims. On its December 31, 2023 balance sheet, what amount of warranty liability will Adams report?
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4. Bonita.com sells 6800 units of its product for $460 each. The selling price includes a one- year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $40 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $4800. What amount should Bonita.com accrue on December 31 for estimated warranty costs? Select answer from the options below a. $8160 b. $32640 c. $ 4800 d. $3360
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2023 that carry a one-year warranty against manufacturer's defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 2% of sales. Sales of the sprinklers in 2023 were $2.8 million. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product: General Journal Accrued liability and expense Warranty expense (2% × $2,800,000) Warranty liability Actual expenditures (summary entry) Warranty liability Cash Debit 56,000 Required 1 Required 2 25,000 Credit 56,000 In late 2024, the company's claims experience was evaluated and it was determined that claims were far more than expected-3% of sales rather than 2%. View transaction list 25,000 Required: 1. Assuming…
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Early in 2020, Pina Equipment Company sold 400 Rollomatics at $ 6,000 each. During 2020, Pina spent $ 20,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All sales transactions are on a cash basis. Prepare 2020 entries for Pina. Assume that Pina estimates the total cost of servicing the warranties in the second year will be $ 37,000. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Prepare 2020 entries for Pina 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 $ 20,000. Estimate revenues to be recognized on a straight-line basis. (If no entry is required, select "No Entry" for the account titles…

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