Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Chapter 11, Problem 10E
1.
To determine
Identify the amount of estimated warranty expense that is to be reported for the copier during the Year 1.
2.
To determine
Identify the amount of estimated warranty liability for the copier as of December 3 of Year 1.
3.
To determine
Identify the amount of estimated warranty liability for 31st December, Year 2.
4.
To determine
Prepare the
- (a) To record the copier’s sale
- (b) To record the adjustments on December 31, Year 1 and to recognize the warranty expense
- (c) To record the repairs that occurs in January of Year 2.
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Hitzu Co. sold a copier (that costs $6,500) for $13,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu
expects warranty costs to be 5% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of
Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $140 for materials taken from the repair
parts inventory. These are the only repairs required in Year 2 for this copier.
1. How much warranty expense does the company report for this copier in Year 1?
Warranty expense
2. How much is the estimated warranty liability for this copier as of December 31 of Year 1?
Estimated warranty liability
3. How much is the estimated warranty liability for this copier as of December 31 of Year 2?
Hitzu Co. sold a copier (that costs $4,800) for $6,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu expects warranty costs to be 4% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $209 for materials taken from the repair parts inventory. These are the only repairs required in Year 2 for this copier. 1. How much warranty expense does the company report for this copier in Year 1? 2. How much is the estimated warranty liability for this copier as of December 31 of Year 1? 3. How much is the estimated warranty liability for this copier as of December 31 of Year 2? 4. Prepare journal entries to record (a) the copier’s sale; (b) the adjustment to recognize the warranty expense on December 31 of Year 1; and (c) the repairs that occur on January 5 of Year 2.
Hitzu Co. sold a copier (that costs $5,500) for $11,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu
expects warranty costs to be 3% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of
Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $123 for materials taken from the repair
parts inventory. These are the only repairs required in Year 2 for this copier.
Chapter 11 Solutions
Principles of Financial Accounting.
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