On November 10, 2020, Singh Electronics began to buy and resell scanners for $58 each. Singh uses the perpetual system to account for inventories. The scanners are covered under a warranty that requires the company to replace any non-working scanner within 90 days. When a scanner is returned, the company simply throws it away and mails a new one from inventory to the customer. The company’s cost for a new scanner is only $38. Singh estimates warranty costs based on 16% of the number of units sold. The following transactions occurred in 2020 and 2021 (ignore GST and PST): 2020 Nov. 15 Sold 2,500 scanners for $145,000 cash. 30 Recognized warranty expense for November with an adjusting entry. Dec. 8 Replaced 180 scanners that were returned under the warranty. 15 Sold 5,500 scanners. 29 Replaced 46 scanners that were returned under the warranty. 31 Recognized warranty expense for December with an adjusting entry. 2021 Jan. 14 Sold 275 scanners. 20 Replaced 68 scanners that were returned under the warranty. 31 Recognized warranty expense for January with an adjusting entry. Required: 1. What is the balance of the estimated warranty liability as of January 31, 2021? 2. Prepare journal entries to record ALL transactions and year-end adjustments (ignore sales taxes). (Round intermediate calculations and final answer to the nearest whole number.)

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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On November 10, 2020, Singh Electronics began to buy and resell scanners for $58 each. Singh uses the perpetual system to account for inventories. The scanners are covered under a warranty that requires the company to replace any non-working scanner within 90 days. When a scanner is returned, the company simply throws it away and mails a new one from inventory to the customer. The company’s cost for a new scanner is only $38. Singh estimates warranty costs based on 16% of the number of units sold. The following transactions occurred in 2020 and 2021 (ignore GST and PST):

	2020
Nov.	15	Sold 2,500 scanners for $145,000 cash.
	30	Recognized warranty expense for November with an adjusting entry.
Dec.	8	Replaced 180 scanners that were returned under the warranty.
	15	Sold 5,500 scanners.
	29	Replaced 46 scanners that were returned under the warranty.
	31	Recognized warranty expense for December with an adjusting entry.
	2021
Jan.	14	Sold 275 scanners.
	20	Replaced 68 scanners that were returned under the warranty.
	31	Recognized warranty expense for January with an adjusting entry.

Required:
1. What is the balance of the estimated warranty liability as of January 31, 2021?

2. Prepare journal entries to record ALL transactions and year-end adjustments (ignore sales taxes). (Round intermediate calculations and final answer to the nearest whole number.)

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