The following selected transactions relate to contingencies of Classical Tool Makers, Inc., which began operations in July 2021.Classical's fiscal year ends on December 31. Financial statements are issued in April 20221. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs areexpected to approximate 5% of sales. Sales were $2.1 million (all credit) for 2021. Actual warranty expenditures were $40,100 andwere recorded as warranty expense when Incurred.2. Although no customer accounts have been shown to be uncollectible, Classical estimates that 2% of credit sales will eventuallyprove uncollectible.3. in December 2021, the state of Tennessee filed sult against Classical, seeking penalties for violations of clean air laws. On January23, 2022, Classical reached a settlement with state authorities to pay $1.6 million in penalties.4. Classical is the plaintiff in a $4.1 milion lawsuit filled against a suppiler. The sult is in final appeal and attomeys advise that it isvirtually certain that Classical will win the case and be awarded $2.6 million.5. In November 2021, Classical became aware of a design flaw in an Industrial saw that poses a potential electrical hazard. A productrecall appears unavoidable. Such an action would likely cost the company $510,000.6. Classical offered $30 cash rebates on a new model of Jigsaw. Customers must mall in a proof-of-purchase seal from the packageplus the cash register receipt to receive the rebate. Expérience suggests that 65% of the rebates will be claimed. Ten thousand andone hundred of the Jigsaws were sold in 2021. Total rebates to customers in 2021 were $106,000 and were recorded aspromotional expense when paid.Required:1-a Prepare the year-end entries for any amounts that should be recorded as a result of each of the above contingencles.1-b Indicate whether a disclosure note is needed for the above transactions.Complete this question by entering your answers in the tabs below.Reg 1ARea 18Prepare the year-end entries for any amounts that should be recorded as a result of each of the above contingencles. (If no entry isrequired for a transaction/event, select "No journal entry required in the first account field. Enter your answers in whole dollars.)View transaction IntJournal entry worksheet2Record any necessary year-end entry related to the warranties.Transaction1Note: Enter debits before credits.Hacord entryGeneral JournalClear entryDebit CreditVww.general journal>

seeking penalties settlement with state authorities to pay $1.6 million in pen 1 milion lawsuit filed against a suppiler. The suit is in final Vill win the case and be awarded $2.6 million. ecame aware of a design flaw in an Industrial saw that po ich an action would likely cost the company $510,000. ates on a new model of Jigsaw. Customers must mall in a o receive the rebate. Experience suggests that 65% of the re sold in 2021. Total rebates to customers in 2021 were Id. for any amounts that should be recorded as a result of ea note is needed for the above transactions.

seeking penalties settlement with state authorities to pay $1.6 million in pen 1 milion lawsuit filed against a suppiler. The suit is in final Vill win the case and be awarded $2.6 million. ecame aware of a design flaw in an Industrial saw that po ich an action would likely cost the company $510,000. ates on a new model of Jigsaw. Customers must mall in a o receive the rebate. Experience suggests that 65% of the re sold in 2021. Total rebates to customers in 2021 were Id. for any amounts that should be recorded as a result of ea note is needed for the above transactions.

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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