On January 1, 2021, Enzo S.r.l. sold and delivered a car to a customer for $80,000 cash. The car included a basic standard one-year (assurance) warranty for major parts and a five-year extended warranty (starts January 1, 2022) for all parts and labor. Two performance obligations are identified: car with standard warranty; and extended warranty. Notes: The car could have been sold separately for $75,000 and the extended warranty for $9,000. ● The estimated cost for the standard warranty is $1,500 and $1,500 of cash was spent in 2021 for the standard warranty. The estimated cost of servicing the extended warranty is $4.000 and costs are expected to be incurred about evenly over the five-year contract. $800 of cash was spent in 2022 relating to the extended warranty. Required: Show all CALCULATIONS. Clearly LABEL your answers. a) What is the total impact on INCOME of Enzo in 2021 as a result of this scenario? b) What is the impact on the LIABILITIES section of the statement of financial position for Enzo at December 31, 2022 as a result of this scenario? List any accounts and amounts.
On January 1, 2021, Enzo S.r.l. sold and delivered a car to a customer for $80,000 cash. The car included a basic standard one-year (assurance) warranty for major parts and a five-year extended warranty (starts January 1, 2022) for all parts and labor. Two performance obligations are identified: car with standard warranty; and extended warranty. Notes: The car could have been sold separately for $75,000 and the extended warranty for $9,000. ● The estimated cost for the standard warranty is $1,500 and $1,500 of cash was spent in 2021 for the standard warranty. The estimated cost of servicing the extended warranty is $4.000 and costs are expected to be incurred about evenly over the five-year contract. $800 of cash was spent in 2022 relating to the extended warranty. Required: Show all CALCULATIONS. Clearly LABEL your answers. a) What is the total impact on INCOME of Enzo in 2021 as a result of this scenario? b) What is the impact on the LIABILITIES section of the statement of financial position for Enzo at December 31, 2022 as a result of this scenario? List any accounts and amounts.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Transcribed Image Text:On January 1, 2021, Enzo S.r.l. sold and delivered a car to a customer for $80,000
cash. The car included a basic standard one-year (assurance) warranty for major parts
and a five-year extended warranty (starts January 1, 2022) for all parts and labor.
Two performance obligations are identified: car with standard warranty; and
extended warranty.
Notes:
The car could have been sold separately for $75,000 and the extended warranty
for $9,000.
The estimated cost for the standard warranty is $1,500 and $1,500 of cash was
spent in 2021 for the standard warranty.
The estimated cost of servicing the extended warranty is $4,000 and costs are
expected to be incurred about evenly over the five-year contract. $800 of cash was
spent in 2022 relating to the extended warranty.
Required: Show all CALCULATIONS. Clearly LABEL your answers.
a) What is the total impact on INCOME of Enzo in 2021 as a result of this scenario?
b) What is the impact on the LIABILITIES section of the statement of financial
position for Enzo at December 31, 2022 as a result of this scenario? List any
accounts and amounts.
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