Warranty 40 provides extended service contracts on electronic equipment sold through major retailers. The standard contract is for three years. During the current year, Warranty40 provided 2,000 such warranty contracts at an average price of $30 each. Related to these contracts, the company spent $15,000 servicing the contracts during the current year and expects to spend $10,000 more in the future What is the net protit that the company will recognize in the current year related Po these contracts $25,000 O $10,000 O $5,000 O No Answer is Correct O

Warranty 40 provides extended service contracts on electronic equipment sold through major retailers. The standard contract is for three years. During the current year, Warranty40 provided 2,000 such warranty contracts at an average price of $30 each. Related to these contracts, the company spent $15,000 servicing the contracts during the current year and expects to spend $10,000 more in the future What is the net protit that the company will recognize in the current year related Po these contracts $25,000 O $10,000 O $5,000 O No Answer is Correct O

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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Sunnyvale Computer Company sells a line of computers that carry a six-month warranty. Customers are offered the opportunity to buy a two-year extended warranty for an additional charge. During 2024, Sunnyvale received $328,000 from customers for these extended warranties. All sales are on credit, and funds are received evenly throughout the year and the warranties go into effect immediately after purchase. Required: Prepare a summary journal entry to record sales of the extended warranties. Also prepare any other entries associated with the warranties that should be recorded during 2024. 1. Record the $328,000 sale of the extended warranties. 2.Record the recognition of revenue from extended warranties for the year ending December 31, 2024.
Cupola Awning Corporation introduced a new line of commercial awnings in 2024 that carry a two-year warranty against manufacturer’s defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales Actual Warranty Expenditures $ 5,000,000 $ 37,500 Required: Does this situation represent a loss contingency? Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of the warranty that should be recorded during 2024. What amount should Cupola report as a liability at December 31, 2024?
Concord Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first year after sale-2% of sales; second year after sale-4% of sales; and third year after sale-5% of sales. Sales and actual warranty expenditures for the first three years of business were: Sales Warranty Expenditures 2021 $750,000 $ 15,900 2022 1,010,000 46, 000 2023 1,017, 000 80,000 (a) Calculate the amount that Concord should report as warranty expense on its 2023 income statement and as a warranty liability on its December 31, 2023 SFP using the assurance - type warranty (expense - based approach). Assume that all sales are made evenly throughout each year and that warranty expenditures are also evenly spaced according to the rates above. Warranty expense Warranty liability
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EZ Wheels Corporation manufactures kick scooters. The company offers a one-year warranty on all scooters. During the year, the company recorded net sales of $2,850 million. Historically, about 4% of all sales are returned under warranty and the cost of repairing and or replacing goods under warranty is about 30% of retail value. Assume that at the start of the year EZ Wheels’ balance sheet included an accrued warranty liability of $24.5 million and at the end of the year, the accrued warranty liability balance was $18.6 million. How much did EZ Wheels pay during the year to repair and/or replace scooters under warranty? Select one: a. None of these are correct. b. $40.1 million c. $34.2 million d. $114.0 million e. $18.6 million
ABC Inc. sells medical equipment. ABC provides its customers anoption to purchase a three-year warranty. Warranty contracts sold on 2021, 2022 and2023 are P720,000, 864,000 and 1,004,000, respectively. Management expects that:20% of warranty costs are done in the 1st year from the date of sale.30% of warranty costs are done in the 2nd year from the date of sale.50% of warranty costs are done in the 3rd year from the date of sale.Actual costs incurred on repairs are P25,000, 100,000 and 200,000, respectively.What amount should be reported as liability on warranties on December 31, 2021, 2022and 2023?
Gen sells cellular phones. Each phone sells for P10,000 and carries a warranty against defects of period of 1 year counting from the date of purchase. The firm sold 60,000 phones in 2019. Past experience indicates that 10% of the phones will need some type of repair during the warranty period. In the past, the firm has incurred expenditures at P400 on each telephone needing repair due to manufacturing defects. At the beginning of the year, the Estimate Liability for Warranties account had a credit of P59,400. Actual expenditures during the year amounted to P1.5M. The balance of the Estimated Liability for Warranties at year-end is: O 500,000 O 2,400,000 O 1,500,000 0 950,000
Oak Co. offers a three-year warranty on its products. Oak previously estimated warranty costs to be 2% of sales. Due to atechnological advance in production at the beginning of 2010, Oak now believes 1% of sales to be a better estimate of warranty costs. Warranty costs of 80,000 and 96,000 were reported in 2008 and 2009, respectively. Sales for 2010 were 5,000,000. What amount should be disclosed in Oak’s 2010 financial statements as warranty expense?a. 50,000b. 88,000c. 100,000d. 138,000
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1. On January 1,2019, QWERTY Company introduced a new line of product that carries a 3 year warranty against factory defects. The product warranties provide assurance that the new line of product will function as intended based on agreed-upon specifications. Estimated warranty costs related to peso sales are as follows: 2% of sales in the year of sale, 4% of sales in the year after sale, and 6% of sales in the second year after sale. Sales and warranty expenditures for the period 2019 to 2021 were as follows: Sales Actual warranty expenditures 2019 P 5,000,000 P 100,000 2020 7,500,00 150,000 2021 10,000,000 200,000 The company's reporting period is a calendar year. How much is the warranty liability as of December 31,2021? 2. If Chimmy Co. issued a 3-year non-interest bearing note in exchange of an equipment for P 1,000,000, which of the…