P-5*** SAN Company began selling new line of product that carries a one year warranty against defects. Based upon experience the estimated warranty costs related to peso sales is 5%. The selling price per unit of product is P1500. The number of units sold in 2011 and 2012 are 12,000 units and 20,000 units, respectively. Actual warranty expenditures for the year 2011 amounted to P800,000 and in 2012, the warranty expenditures amountedto P1,200,000. 8. At December 31,2011 and December 31,2012 financial statements, how much shall be reported as Accrual approach Expense approach Estimated warranty liability,2011 Warranty expense,2011 Estimated warranty liability,2012

P-5*** SAN Company began selling new line of product that carries a one year warranty against defects. Based upon experience the estimated warranty costs related to peso sales is 5%. The selling price per unit of product is P1500. The number of units sold in 2011 and 2012 are 12,000 units and 20,000 units, respectively. Actual warranty expenditures for the year 2011 amounted to P800,000 and in 2012, the warranty expenditures amountedto P1,200,000. 8. At December 31,2011 and December 31,2012 financial statements, how much shall be reported as Accrual approach Expense approach Estimated warranty liability,2011 Warranty expense,2011 Estimated warranty liability,2012

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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Puzzles Company sells merchandise with a 1-year warranty. In Year 1, sales consisted of 3,700 units. It is estimated that warranty repairs will average $16 per unit sold, and 40% of the repairs will be made in Year 1 and 60% in Year 2. In the income statement for Year 1, Puzzles Company should show warranty expense of a. $35,520. b. $23,680. c. $0. d. $59,200.
3
Product A comes with a two year warranty when purchased by customers. The estimated warranty costs as a percentage of dollar sales are 3% in the year of sale and 5% in the second year after the sale. The following information relates to sales and warranty expenditures of Product A Actual warranty expenditures $ 10,000 $ 35,000 Year Year 1 Year 2 Sales $400,000 $500,000 Which of the following is NOT part of the required journal entry in Year 1 based on the above information? Multiple Choice Credit cash $10,000 Debit warranty expense $12,000 None of the other alternatives are correct Debit warranty expense $32,000 Credit sales $400,000
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EZ Wheels Corporation manufactures kick scooters. The company offers a one-year warranty on all scooters. During the year, the company recorded net sales of $2,850 million. Historically, about 4% of all sales are returned under warranty and the cost of repairing and or replacing goods under warranty is about 30% of retail value. Assume that at the start of the year EZ Wheels’ balance sheet included an accrued warranty liability of $24.5 million and at the end of the year, the accrued warranty liability balance was $18.6 million. How much did EZ Wheels pay during the year to repair and/or replace scooters under warranty? Select one: a. None of these are correct. b. $40.1 million c. $34.2 million d. $114.0 million e. $18.6 million
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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
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