service contracts on equipment sold through major retailers. The standard contract is for three years. During 2021, ABC Company provided 2,000 such warranty contracts at an average price of P810 each. Related to these contracts, the company spent P200,000 servicing the contracts during the current year and expects to spend P600,00 more in the future.
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ABC Company provides extended service contracts on equipment sold through major retailers. The standard contract is for three years. During 2021, ABC Company provided 2,000 such warranty contracts at an average price of P810 each. Related to these contracts, the company spent P200,000 servicing the contracts during the current year and expects to spend P600,00 more in the future.
The amount of liability included in the December 31, 2021
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- On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp. The contract ends on March 31, 2020, and has a monthly payment of 3,200. The contract does not include any stipulations for additional periods. On June 1, Grahams WeedFeed and BigData sign a new 12-month contract that is retroactive to April 1, 2020. The monthly fee for the new contract is 4,000 per month and is also retroactive to April 1, 2020. During April and May of 2020, while the new contract was being negotiated, Grahams Weed Feed continued to maintain the grounds, and BigData continued to pay 3,200 per month. BigData was satisfied with Grahams WeedFeeds performance, and the only issue during negotiations was the monthly fee. Required: Determine if a valid contract exists between Grahams WeedFeed and BigData during April and May 2020.On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.ABC Company provides extended service contracts on equipment sold through major retailers. The standard contract is for three years. During 2021, ABC Company provided 2,000 such warranty contracts at an average price of P810 each. Related to these contracts, the company spent P200,000 servicing the contracts during the current year and expects to spend P600,00 more in the future. The net profit for 2021 related to the extended service contract is?
- ABC Company provides extended service contracts on equipment sold through major retailers. The standard contract is for three years. During 2021, ABC Company provided 2,000 such warranty contracts at an average price of P810 each. Related to these contracts, the company spent P200,000 servicing the contracts during the current year and expects to spend P600,00 more in the future. The amount of liability included in the December 31, 2021 balance sheet is Group of answer choices A. 820,000 B. 1,420,000 C. 1,080,000 D. 600,000TEN Company provides extended service contracts on equipment sold through major retailers. The standard contract is for three years. During 2021, TEN Company provided 2,000 such warranty contracts at an average price of P810 each. Related to these contracts, the company spent P200,000 servicing the contracts during the current year and expects to spend P600,00 more in the future. The amount of liability included in the December 31, 2021 balance sheet is 820,000 1,420,000 600,000 1,080,000EFG Corporation sold 10,500 dishwashers for P1,100 each during 2020. The dishwashers are under warranty for one year following the sale. Maintenance on the dishwashers during the warranty period averages P90 each. Actual warranty costs incurred during 2020 for units sold that year were P296,000. The statement of financial position at year end will report a related liability of: Group of answer choices 945,000 649,000 1,030,900 296,000
- Dawson Company manufactures television components and sells them with a 6-month warranty under which defective components will be replaced without charge. On January 1, 2021, the warranty liability had a balance es P620,000. By June 30, 2021, the warranty liability on January 1, 2021 had been reduced to P120,400 by debits for estimated net cost of components returned that had been sold in 2020 The entity started out in 2021 expecting 7% of sales to be returned. However, due to the introduction of new models during the year, this estimated percentage of returns was increased to 10% on May 1. It is assumed that no components sold during a given month are returned in that month. Each component is stamped with a date at time of sale so that the warranty may be properly administered. The following table of percentages indicates the likely pattern of sales returns during the 6-month period of the warranty, starting with the month following the sale of components. Percentage of total returns…Lynford Company sold 10,500 dishwashers for $1,100 each during 2021. The dishwashers are under warranty for one year following the sale. Maintenance on the dishwashers during the warranty period averages $90 each. Actual warranty costs incurred during 2021 for units sold that year were $296,000. The statement of financial position at year end will report a related liability of: Select one: a. $296,000. O b. $649,000. O c. $1,030,900. O d. $945,000.Perry Company sells 3,000 units of its product for $ 500 each in 2021. The selling price includes a one-year warranty on parts. It is expected that 2% of the units will be defective and that repair costs will average $50 per unit. In 2021, warranty contracts are honoured on 50 units for a total cost of $ 2,500. Perry Company's balance sheet reported blank as Estimated Warranty Liability on December 31, 2021.
- 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 2022 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs are expected to approximate 5% of sales. Sales were $2.1 million (all credit) for 2021. Actual warranty expenditures were $40,100 and were 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 eventually prove uncollectible. 3. in December 2021, the state of Tennessee filed sult against Classical, seeking penalties for violations of clean air laws. On January 23, 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 Weeknd Co., a machinery dealer, sells a machine for P22,200 under a 1-year warranty contract that requires the company to replace all defective parts and to provide the necessary repair labor at no cost to the customers. With sales being made evenly throughout the year, The Weekend Co. sells for cash 600 machines in 2020 (half of the warranty expense is incurred in 2020, half in 2021). Based on experience, the 1-year warranty costs are estimated to be P510 parts and P660 labor. Assume that in 2020, these warranty costs are incurred exactly as estimated QUESTIONS: What amount of warranty expense would be charged against 2020 revenue? What amount of warranty liability would be appeared on the December 31,2020, statement of financial position?At the beginning of 2021, Angel Corporation began offering a 1-year warranty on its products. The warranty program was expected to cost Angel 4% of net sales. Net sales made under warranty in 2021 were $260 million. Five percent of the units sold were returned in 2021 and repaired or replaced at a cost of $9.0 million. The amount of warranty expense in Angel's 2021 income statement is:
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