On January 1, 2023, Sheridan Ltd. sold on account 800 units of its product for a total price of $575,000 and a cost of $493,000. The products have a one-year assurance-type warranty and Sheridan estimates that the cost will be $23,000. By the company's year-end December 31, 2023, actual warranty costs related to the products sold was $18,500, paid in cash. Prepare all appropriate journal entries including the sale of merchandise. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Record journal entries in the order presented in the problem.) Date January 1/23 January 1/23 December 31/23 Account Titles and Explanation Accounts Receivable Warranty Expense Sales Revenue Unearned Revenue (To record the sale) Cost of Goods Sold Inventory (To record the cost of goods sold) Unearned Revenue Warranty Expense Cash Debit Credit

On January 1, 2023, Sheridan Ltd. sold on account 800 units of its product for a total price of $575,000 and a cost of $493,000. The products have a one-year assurance-type warranty and Sheridan estimates that the cost will be $23,000. By the company's year-end December 31, 2023, actual warranty costs related to the products sold was $18,500, paid in cash. Prepare all appropriate journal entries including the sale of merchandise. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Record journal entries in the order presented in the problem.) Date January 1/23 January 1/23 December 31/23 Account Titles and Explanation Accounts Receivable Warranty Expense Sales Revenue Unearned Revenue (To record the sale) Cost of Goods Sold Inventory (To record the cost of goods sold) Unearned Revenue Warranty Expense Cash Debit Credit

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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mpany sells televisions at an average price of $976 and also offers to each customer a separate 3 - year warranty contrac at requires the company to perform periodic services and to replace defective parts. During 2025, the company elevisions and 189 warranty contracts for cash. It estimates the 3 - year warranty costs as $18 for parts and $28 for labor, ints for warranties separately. Assume sales occurred on December 31, 2025, and straight-line recognition of warranty occurs.
Pharoah Company sold 10,500 Super-Spreaders on December 31, 2025, at a total price of $987,000, with a warranty guarantee that the product was free of any defects. The cost of the spreaders sold is $588,000. The assurance warranties extend for a 2-year period and are estimated to cost $38,600. Pharoah also sold extended warranties (service-type warranties) related to 2,000 spreaders for 2 years beyond the 2-year period for $12,000. Given this information, determine the amounts to report for the following at December 31, 2025: sales revenue, warranty expense, unearned warranty revenue, warranty liability, and cash. Amounts Reported in Income $ Amounts Reported on the Balance Sheet $
Lindy Appliance begins operations in 2021 and offers a one-year warranty on all products sold. Total appliance sales in 2021 are $1,600,000, and Lindy estimates future warranty costs in 2022 to be 2% of current sales. Actual warranty costs in 2022 are $25,000. Also in 2022, Lindy has additional sales of $2,400,000 and revises its estimate of warranty costs associated with sales in 2022 to be 1.5%.Required:1. Record the adjusting entry for estimated warranty costs at the end of 2021.2. Record the summary entry for actual warranty expenditures in 2022, assuming all costs were paid in cash.3. Record the adjusting entry for estimated warranty costs at the end of 2022.4. What is the balance in Warranty Liability at the end of 2021 and 2022?
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.
Flint Company sells products with a 2-year warranty. Past experience indicates that 2% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is estimated to be $85 per unit. During 2020, 8,450 units were sold at an average price of $400. During the year, repairs were made on 55 units at a cost of $3,600. Prepare journal entries to record the repairs made under warranty and estimated warranty expense for the year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Warranty Expense (To record cost of honoring warranties) Warranty Expense Warranty Liability (To accrue estimated warranty costs) Debit 3600 Credit 3600
ABC Inc. sells medical equipment. ABC provides its customers anoption to purchase a three-year warranty. Warranty contracts sold on 2021, 2022 and2023 are P720,000, 864,000 and 1,004,000, respectively. Management expects that:20% of warranty costs are done in the 1st year from the date of sale.30% of warranty costs are done in the 2nd year from the date of sale.50% of warranty costs are done in the 3rd year from the date of sale.Actual costs incurred on repairs are P25,000, 100,000 and 200,000, respectively.What amount should be reported as liability on warranties on December 31, 2021, 2022and 2023?
Early in 2020, Swifty Equipment Company sold 600 Rollomatics at $5,700 each. During 2020, Swifty spent $20,000 servicing the 2- year assurance warranties that accompany the Rollomatic. All sales transactions are on a cash basis. (a) Prepare 2020 entries for Swifty. Assume that Swifty 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 O 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 List of Accounts
Ivanhoe Factory provides a 2-year warranty with one of its products which was first sold in 2020. Ivanhoe sold $909,800 of products subject to the warranty. Ivanhoe expects $124,480 of warranty costs over the next 2 years. In that year, Ivanhoe spent $73,090 servicing warranty claims. Prepare Ivanhoe's journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date 2020 During 2020 12/31/20 Account Titles and Explanation (To record sales) (To record warranty claims) 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?
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…
On January 1, 2021, Glanville Company sold goods to Otter Corporation. Otter signed an installment note requiring payment of $21,500 annually for five years. The first payment was made on January 1, 2021. The prevailing rate of interest for this type of note at date of issuance was 10%. Glanville should record sales revenue in January 2021 of: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice $107,500 $81,502 $89,652 None of these answer choices are correct.