What is the warranty liability at the end of the month? Summit Electronics sells a single product with a 90-daywarranty. Engineers estimate that 4% of units sold willrequire repairs at an average cost of $50 per unit.In Summit's first month, total sales were 500 units, and bythe end of the month, 8 defective units had beenrepaired.What is the warranty liability at the end of the month?

Step 1: Definition of Warranty LiabilityWarranty Liability is an estimated obligation a company…

Answered: Summit Electronics sells a single…

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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Backpack Co. was organized to sell a single product that carries a 45-day warranty againstdefects. Engineering estimates indicate that 2% of the units sold will prove defective andrequire an average repair cost of $60 per unit. During Backpack’s first month of operations,total sales were 900 units; by the end of the month, five defective units had been repaired.The liability for product warranties at month-end should bea. $1,380.b. $300.c. $1,080.d. $780.
Hopewell sells a line of goods under a six-month warranty. Any defect arising during that period is repaired free of charge. Hopewell has calculated that if all the goods sold in the last six months of the year required repairs the cost would be $2 million. If all of these goods had more serious faults and had to be replaced the cost would be $6 million. The normal pattern is that 80% of goods sold will be fault-free, 15% will require repairs and 5% will have to be replaced. What is the amount of the provision required?
Wally Co. began selling merchandise on November 1, 2022. The company offers a 50-day warranty for defective merchandise. Based on prior experience with similar merchandise, Wally Co. predicts that 2.80% of the units sold will encounter a fault within the warranty period, with a replacement or repair of a damaged unit costing an average of $30. In November, Wally Co. sold 25,000 units and 400 defective units were returned. In December, Wally Co. sold 32,000 units and 544 defective units were returned. The actual cost of replacing the defective units was $38,500. Prepare a journal entry to accrue for the estimated warranty costs for the November and December sales at December 31, 2022. Prepare one summary journal entry at December 31, 2022, to record the cost of replacing the defective merchandise returned during November and December. What amounts will be included in Wally Co.’s 2022 income statement and balance sheet at December 31, 2022, with regard to the warranty? Show steps…
Cullumber Inc. began selling game consoles on November 1, 2024. The company offers a 60-day warranty for defective merchandise. Based on past experience with other similar products, Cullumber estimates that 2.80% of the units sold will become defective in the warranty period, and that the average cost of replacing or repairing a defective unit is $22. In November, Cullumber sold 33,000 units and 510 defective units were returned. In December, Cullumber sold 38,000 units and 690 defective units were returned. The actual cost of replacing the defective units was $21,120. Prepare a journal entry to accrue for the estimated warranty costs for the November and December sales at December 31, 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Date Account Titles Dec. 31 Debit Credit
Carla Vista Company began selling game consoles on November 1, 2021. The company offers a 75-day warranty for defective merchandise. Based on past experience with other similar products, Carla Vista estimates that 2.30% of the units sold will become defective in the warranty period, and that the average cost of replacing or repairing a defective unit is $18. In November, Carla Vista sold 32,000 units and 460 defective units were returned. In December, Carla Vista sold 60,000 units and 630 defective units were returned. The actual cost of replacing the defective units was $19,620. Prepare a journal entry to accrue for the estimated warranty costs for the November and December sales at December 31, 2021. Prepare one summary journal entry at December 31, 2021, to record the cost of replacing the defective game consoles returned during November and December.What amounts will be included in Carla Vista's 2021 income statement and balance sheet at December 31, 2021, with…
Brigham Company sells an electric timer that carries a 60-day unconditional warranty against product failure. Based on a reliable statistical analysis, Brigham knows that between the sale and the end of the product warranty period, three percent of the units sold will require repair at an average cost of $35 per unit. The following data reflect Brigham's recent experience: Units sold Known product failures from sales in: October November December October November December Dec. 31 Total 36,000 34,000 45,000 115,000 320 550 230 210 360 410 1,080 590 410 Calculate the estimated liability for product warranties at December 31. $ 168,510 x (Assume that warranty costs of known failures have already been reflected in the records.)
During July, Cypress Audio sold 400 wireless speakers for $180 each. Each speaker had cost Cypress $90 to manufacture and includes a one- year warranty. If 7% of the speakers typically need to be replaced over the warranty period, and twenty-two are actually replaced during July, for what amount in July should Cypress debit Product Warranty Expense?
Modem Appliances, Inc. sells food processors for $150 with a 120-day warranty against defects. Past experience indicates that 5% of the processors will have some defect during the warranty period and that the necessary repairs and adjustments will cost $25 per defective unit. Sales for August are $225,000. What is the estimated liability for product warranties for units sold in August? Select one: a. $3,000 b. $1,800 C. $11,250 d. $1,875 e. None of the above

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