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 please
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 please
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 please
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