s that carry a 90-day manufacturer’s warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $428,000 for these extended warranties (approximately evenly throughout the year). 2. Prepare journal entries that summarize sales of the ex

s that carry a 90-day manufacturer’s warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $428,000 for these extended warranties (approximately evenly throughout the year). 2. Prepare journal entries that summarize sales of the ex

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Refer to the photo
Proctor provides 1 year warranty on every chair it produces and sells. On 12-31-19, proctor reported warranty payable of $960,000. During 2019, proctor recognized $640,000 of warranty expense. Warranty claims of $510,000. Tax rate $21%. A) DTC: 201,600 B) DTA: 174, 300 C) DTC: 130, 000 D) DTA: 228,900
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.
Extravagant Company, which uses IFRS, sells home appliances. On January 1, 2024, it sells a fridge to a customer for $5,300 cash and, as part of a promotion, Extravagant gives the customer a free 15- month extended warranty (service-type warranty). The fridge also has a 9-month assurance-type warranty, which is estimated to cost Extravagant 4% of sales revenue. Assume that the 15-month extended warranty begins after the 9-month assurance-type warranty has expired, so the customer effectively receives 24 months of warranty coverage. Additional information follows: (a) The fridge, if sold by itself, would normally sell for $5,100. The cost of the fridge to Extravagant, based on a first-in first-out (FIFO) perpetual inventory system, is $1,900. (b) The extended warranty, if sold by itself, would normally sell for $1,275. Required: (A) Prepare the journal entry/entries that should be recorded on January 1, 2024. (B) How much Operating Income would be reported by Extravagant for the…
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…
Das Medical introduced a new implant that carries a five-year warranty against manufacturer's defects. Based on industry experience with similar product introductions, warranty costs are expected to approximate 2% of sales. Sales were $21 million and actual warranty expenditures were $31,750 for the first year of selling the product. Complete the following T-account to determine the amount (if any) Das should report as a liability at the end of the year. Note: Enter your answers in whole dollars. Beginning Balance Ending Balance Debit Warranty Liability 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?
Das Medical introduced a new implant that carries a five-year warranty against manufacturer's defects. Based on industry experience with similar product introductions, warranty costs are expected to approximate 3% of sales. Sales were $9 million and actual warranty expenditures were $38,750 for the first year of selling the product. Complete the following T-account to determine the amount (if any) Das should report as a liability at the end of the year. Note: Enter your answers in whole dollars. Debit Beginning Balance Actual expenditures Ending Balance Answer is not complete. Warranty Liability 0 -11,750 38,750 → 27,000 0 -27,000 Credit Warranty expense
On December 31, 2023, Sablok Company sells production equipment to Tang Inc. for $50,000. Sablok includes a one-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2023. Sablok estimates the prices to be $48,800 for the equipment and $1,200 for the cost of warranty. Instructions Are the sale of the equipment and the warranty separate performance obligations within the contract? Explain. Prepare a single compound journal entry to record this transaction on December 31, 2024. Ignore any related cost of goods sold entry. Repeat the requirements for part (b), assuming that, in addition to the assurance warranty, Sablok sold an extended warranty (service-type warranty) for an additional two years (2024–2025) for $800. (Hint: Use unearned revenue).