Your answer is partially correct. In 2024, Windsor Company introduces a new product that includes a two-year warranty on parts. During 2024,4,400 units are sold for $365 each. The cost of each unit was $130. The company estimates that 5% of the units will be defective and that the average warranty cost will be $70 per unit. The company has a December 31 fiscal year end and prepares adjusting entries on an annual basis. Prepare an adjusting entry at December 31, 2024, to accrue the estimated warranty cost. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Date Account Titles Dec. 31 Warranty Expense Warranty Liability Debit 11000 Credit 11000

Your answer is partially correct. In 2024, Windsor Company introduces a new product that includes a two-year warranty on parts. During 2024,4,400 units are sold for $365 each. The cost of each unit was $130. The company estimates that 5% of the units will be defective and that the average warranty cost will be $70 per unit. The company has a December 31 fiscal year end and prepares adjusting entries on an annual basis. Prepare an adjusting entry at December 31, 2024, to accrue the estimated warranty cost. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Date Account Titles Dec. 31 Warranty Expense Warranty Liability Debit 11000 Credit 11000

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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Milima Electronic Company sells on account printers for RM1,500 each with a 2-year warranty for performing periodic services and replacing defective parts. Because of COVID 19 pandemic, the company sold only 700 printers on December 2019, however, based on past experience, the company has estimated the total 2-year warranty costs as RM30 for parts and RM60 for labor. On 2020, Miley incurred actual warranty costs relative to 2019 printer sales of RM10,000 for parts and RM18,000 for labor. REQUIRED: (a) Record the above transactions by using the expense warranty treatment for the years 2019 and 2020. (b) If the company sold printers in cash, what are the amounts of warranty expense for 2019 and 2020? (c) Determine amounts of warranty liability that should be recorded under current liabilities and long-term liabilities for the year 2019?
Lynford Company sold 10,500 dishwashers for $1,100 each during 2021. The dishwashers are under warranty for one year following the sale. Maintenance on the dishwashers during the warranty period averages $90 each. Actual warranty costs incurred during 2021 for units sold that year were $296,000. The statement of financial position at year end will report a related liability of: Select one: a. $296,000. O b. $649,000. O c. $1,030,900. O d. $945,000.
Flint Company sells products with a 2-year warranty. Past experience indicates that 2% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is estimated to be $85 per unit. During 2020, 8,450 units were sold at an average price of $400. During the year, repairs were made on 55 units at a cost of $3,600. Prepare journal entries to record the repairs made under warranty and estimated warranty expense for the year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Warranty Expense (To record cost of honoring warranties) Warranty Expense Warranty Liability (To accrue estimated warranty costs) Debit 3600 Credit 3600
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…
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
Early in 2020, Cheyenne Equipment Company sold 500 Rollomatics at $5,400each. During 2020, Cheyenne spent $22,000servicing the 2-year assurance warranties that accompany the Rollomatic. All sales transactions are on a cash basis. (a) Prepare 2020 entries for Cheyenne. Assume that Cheyenne estimates the total cost of servicing the warranties in the second year will be $37,000. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit
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Clean -All Inc. sells washing machines with a 3－year assurance-type warranty. In the past, Clean-All has found that in the year after sale, warranty costs have been 3% of sales; in the second year after sale, 5% of sales；and in the third year after sale, 7% of sales. The following data are also available: 1. Prepare the jotunal entries for the preceding transactions for 2019- 2021. Closing entries are not required. 2 . What amount would Clean-All report as a liability on its D ecember 31> 2021> balance sheet> assuming the liability had a balance of $88>200 on December 31> 2018? 3. Next Level H ow would the failure to recognize a contingent liability affect the fiancial staternents?
Adams, Inc. sells widgets that come with an unconditional five-year warranty. According to Adams' best estimates, 7.8% of all units sold will require repair or replacement under that warranty, and the average cost of honoring one warranty claim is $60. During 2023, Adams' first year of operations, 176,000 widgets were sold, 1,278 of which were repaired or replaced under warranty claims. On its December 31, 2023 balance sheet, what amount of warranty liability will Adams report?
Moon Co. sells food blenders. During 2019, Moon made 37,000 blenders at an average cost of $80. It sold out 25,000 food blenders at an average price of $130. Moon provides a 2-year warranty for each blender sold and estimates 9% of blenders will be returned for warranty with an estimated cost of $36 each. By the end of 2019, Moon has spent $44,000 servicing the warranty repairs. All the above transactions have been settled in cash. During 2019, Moon has 50 employees who work 5-day per week and get paid each other Friday. Salaries of $324,000 and payroll expense of $37,000 have been paid until December 22. Since the business grows quickly, Moon needs cash to expand. By the end of 2018, the Board of Directors authorized the management to issue 10-year bonds with a par value of $3,000,000, annual contract interest rate of 8% and semi-annual interest payments. Moon chose to use the straight-line method to amortize discount or premium on its bonds. On January 1, 2019, management…
Lynford Company sold 10,500 dishwashers for $1,100 each during 2021. The dishwashers are under warranty for one year following the sale. Maintenance on the dishwashers during the warranty period averages $90 each. Actual warranty costs incurred during 2021 for units sold that year were $296,000. The statement of financial position at year end will report a related liability of: Select one: $649,000. $1,030,900. $945,000. $296,000.
Required:1. Prepare the adjustment to correct the estimated warranty liability on December 31, 2022.