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. Required: Prepare the year-end entries for any amounts that should be recorded as a result of each of these contingencies and indicate whether a disclosure note is indicated. 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs are expected to approximate 4% of sales. Sales were $2 million (all credit) for 2021. Actual warranty expenditures were $30,800 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.
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. Required: Prepare the year-end entries for any amounts that should be recorded as a result of each of these contingencies and indicate whether a disclosure note is indicated. 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs are expected to approximate 4% of sales. Sales were $2 million (all credit) for 2021. Actual warranty expenditures were $30,800 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question

Transcribed Image Text:E 13-20
Various
transactions
involving
contingencies
LO13-5, LO13-6
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.
Required:
Prepare the year-end entries for any amounts that should be recorded as a result of each of these contingencies and
indicate whether a disclosure note is indicated.
1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience,
warranty costs are expected to approximate 4% of sales. Sales were $2 million (all credit) for 2021. Actual
warranty expenditures were $30,800 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.
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you


Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,

Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,


Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,

Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON

Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education

Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education