Problem 3-4 (IAA)Sony Company sells stereos under a 2-year warranty contractthat requires the entity to replace defective parts andprovide free labor on all repairs.During 2019, 1,000 units wère sold at P9,000 each.In 2020, the entity sold an additional 900 units at P9,250each.Sales occurred on the last day of the year for both 2019 and2020.Based on past experience, the estimated 2-year warrantýcosts are P200 for parts and P250 for labor per unit.It is also estimated that 40% of the warranty expenditureswill occur in the first year and 60% in the second year.Actual warranty expenditures were:20202021280,000190,000Stereos sold in 2019180,000Stereos sold in 2020Required:1. Prepare journal entries for 2019, 2020 and 2021.2. Analyze the estimated warranty liability account to provethe reasonable accuracy of the balance on December 31,2021.3. Prepare the adjustment of the eştimated warrantyliability on December 31, 2021.

Warranty Expenses Most of the companies which are providing the warranty service to their product to…

Answered: Required: 1. Prepare journal entries…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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Swifty Company must make computations and adjusting entries for the following independent situations at December 31, 2026. 1. Its line of amplifiers carries a 3-year warranty against defects. On the basis of past experience, the estimated warranty costs related to dollar sales are first year after sale-2% of sales revenue; second year after sale-3% of sales revenue; and third year after sale-5% of sales revenue. Sales and actual warranty expenditures for the first 3 years of business were: Sales Revenue 2024 $764,500 2025 1,177,800 2026 1,155,500 Warranty Expenditures $6,330 16,190 64,340 Compute the amount that Swifty should report as a liability in its December 31, 2026, balance sheet. Assume that all sales are made evenly throughout each year with warranty expenses also evenly spaced relative to the rates above. Liability that should be reported on December 31, 2026 $ 2. With some of its products, Swifty includes coupons that are redeemable in merchandise. The coupons have no…
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18. Melanie Corp. borrowed $101,000 cash on September 1, 2019, and signed a one-year 6%, interest-bearing note payable. The interest and principal are both due on August 31, 2020. Assume that the appropriate adjusting entry was made on December 31, 2019 and that no adjusting entries have been made during 2020. Which of the following would be the required journal entry to pay the note on August 31, 2020? Multiple Choice Interest payable2,020 Notes payable101,000 Cash 103,020 Notes payable101,000 Interest expense6,060 Cash 107,060 Interest expense6,060 Cash 6,060 Interest expense4,040 Interest payable2,020 Notes payable101,000 Cash 107,060
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On May 14, a prospect completes an applicalion for insurance. The producer collects the initial premium and issues a conditional receipt. The insurance company determines that the prospedt is insurable and issues a standard policy on May 26. If the producer delivers the policy to the insured on June 1, the effective date of coverage is A. May 14 B. May 24 C. May 26 D. June 1
Required:1. Prepare the adjustment to correct the estimated warranty liability on December 31, 2022.

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Required: 1. Prepare journal entries for 2019, 2020 and 2021. 2. Analyze the estimated warranty liability account to prove the reasonable accuracy of the balance on December 31, 2021. 3. Prepare the adjustment of the eştimated warranty liability on December 31, 2021.