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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In 20X1, Stevens Corp. began a new product line of wearable technology that carries a 24-month warranty against manufacturer defects. Based on industry experience, Stevens expects warranty costs to be an amount equal to approximately 9% of total sales dollars. During 20X1, new sales of this technology totaled $3,000,000. The costs incurred to satisfy warranty claims in 20X1 was $90,000. Required: Answer the following two questions. Question #1: What should Stevens report as the "Warranty Expense" balance on its 20X1 income statement?Answer: Question #2: What should Stevens report as the "Warranty Liability" balance on its balance sheet at 12/31/X1?Answer
Braden Bonnet Technologies manufactures sewing and pressing machines that are used in the manufacture of felt hats. Each machine sold includes a three-year limited warranty that guarantees repairs if the machine should fail. The warranty is an integral part of the sale price and is not considered a separate performance obligation. In 2021, 3,000 machines were sold at a price of $11,000 each. Based on past experience, the company has estimated that the expected value of the warranty repairs will be $600 per machine. Actual repair costs on the machines sold in 2021 were incurred as follows: Year Costs Incurred 2021 $970,000 2022 $340,000 2023 $420,000 Required: a. Prepare all the journal entries to record the sale and warranty transactions for 2021 to 2023. b. Determine the warranty liability balance that will be reported at each year-end from 2021 to 2023. (Ctrl) -
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.
Techtronics, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Techtronics also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,300 and $900, respectively. The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a A) debit to Warranty Expense, $900. B) debit to Warranty Liability, $350 C) credit to Warranty Liability, $900 D) credit to Unearned Warranty Revenue, $900
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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Pearl Factory provides a 2-year warranty with one of its products which was first sold in 2025. Pearl sold $1,077,700 of products subject to the warranty. Pearl expects $123,000 of warranty costs over the next 2 years. In that year, Pearl spent $63,400 servicing warranty claims. Prepare Pearl's journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.) Date Account Titles and Explanation During 2025 12/31/25 Warranty Liability Warranty Expense (To record payment for warranty costs incurred) Warranty Expense Inventory (To record sales) Warranty Expense Warranty Liability Debit 123000 63400 59600 Credit 123000 63400 59600
Carla Vista Resellers Ltd. (CVRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $36,480, of which $24,000 had been incurred before year end ($18,240 on replacement appliances and $5,760 for parts). For an additional charge of $144, CVRL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2024, CVRL sold 480 three-year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $14,400. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $43,200, which it…
Ivanhoe Factory provides a 2-year warranty with one of its products which was first sold in 2020. Ivanhoe sold $909,800 of products subject to the warranty. Ivanhoe expects $124,480 of warranty costs over the next 2 years. In that year, Ivanhoe spent $73,090 servicing warranty claims. Prepare Ivanhoe's journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date 2020 During 2020 12/31/20 Account Titles and Explanation (To record sales) (To record warranty claims) Debit Credit
Grouper 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-3% 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 $870,000 $17,100 2022 1,010,000 48,400 2023 1,041,000 80,000 (a) Calculate the amount that Grouper 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 $
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…