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 $764,500 2025 1,177,800 2026 1,155,500 2024 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 expiration date and, in the company's experience, 50% of them are redeemed. The liability for unredeemed coupons at December 31, 2025, was $9,840. During 2026, coupons worth $40,700 were issued, and merchandise worth $8,640 was distributed in exchange for coupons redeemed. Compute the amount of the liability that should appear on the December 31, 2025, balance sheet. Liability that should be reported on December 31, 2026 $
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 $764,500 2025 1,177,800 2026 1,155,500 2024 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 expiration date and, in the company's experience, 50% of them are redeemed. The liability for unredeemed coupons at December 31, 2025, was $9,840. During 2026, coupons worth $40,700 were issued, and merchandise worth $8,640 was distributed in exchange for coupons redeemed. Compute the amount of the liability that should appear on the December 31, 2025, balance sheet. Liability that should be reported on December 31, 2026 $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 expiration date and, in
the company's experience, 50% of them are redeemed. The liability for unredeemed coupons at December 31, 2025, was $9,840.
During 2026, coupons worth $40,700 were issued, and merchandise worth $8,640 was distributed in exchange for coupons redeemed.
Compute the amount of the liability that should appear on the December 31, 2025, balance sheet.
Liability that should be reported on December 31, 2026 $
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