Question 5: Smalltime Flyer Co. sells remote control airplane engines, which carry a one-year warranty. If a customer brings in a defective engine, he replaces the engine with a ne one from his inventory. Smalltime estimates that 2.5% of units sold will be defective. at January 1, the Warranty Liability had a credit balance of $780. Wildhorse provided the following information for his year end of December 31. Cost per engine Total sales $110 1,300 units $3,300 Actual warranty costs Required: a) Calculate the estimated warranty expense for the year. h) Prenare the iournal entne for the estimated warranty expense for the year.

Question 5: Smalltime Flyer Co. sells remote control airplane engines, which carry a one-year warranty. If a customer brings in a defective engine, he replaces the engine with a ne one from his inventory. Smalltime estimates that 2.5% of units sold will be defective. at January 1, the Warranty Liability had a credit balance of $780. Wildhorse provided the following information for his year end of December 31. Cost per engine Total sales $110 1,300 units $3,300 Actual warranty costs Required: a) Calculate the estimated warranty expense for the year. h) Prenare the iournal entne for the estimated warranty expense for the year.

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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! Required Information Saved [The following information applies to the questions displayed below.] On October 29, Lobo Company began operations by purchasing razors for resale. The razors have a 90-day warranty When a razor is returned, the company discards it and malls a new one from Merchandise Inventory to the customer. The company's cost per new razor is $16 and its retail selling price is $80. The company expects warranty costs to equal 7% of dollar sales. The following transactions occurred. November 11 Sold 60 razors for $4,800 cash. November 30 December 9 December 16 December 29 December 31 January 5 January 17 January 31 Recognized warranty expense related to November sales with an adjusting entry. Replaced 12 razors that were returned under the warranty. Sold 180 razors for $14,400 cash. Replaced 24 razors that were returned under the warranty. Recognized warranty expense related to December sales with an adjusting entry. Sold 120 razors for $9,600 cash. Replaced 29 razors…
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