Warranty liability: Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting. Requirement 1: To prepare: Journal entries to account for the entries and adjustments

Question

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Answer 1

Question

Chapter 11, Problem 4BPSB

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 1:

To prepare:

Journal entries to account for the entries and adjustments

Expert Solution

Answer to Problem 4BPSB

Lee Co.
Journal Entries

S.no	Date	Accounts	Debit	Credit

	Nov 16	Cash	2,500
		Sales		2,500
		(Being 50 grinders sold for cash)

	Nov 30	Warranty Expenses	250
		Estimated Warranty Liability		250
		(Being warranty liability accounted for on Nov 16 sales for 60 days)

	Dec.12	Estimated Warranty Liability	144
		Inventory		144
		(Being 6 grinders costing $24 each replaced under warranty)

	Dec. 18	Cash	10,000
		Sales		10,000
		(Being 200 grinders sold for cash)

	Dec 28	Estimated Warranty Liability	106
		Warranty Expenses	302
		Inventory		408
		(Being 17 razors costing $24 each replaced under warranty and warranty expenses charged)

	Dec 31	Warranty Expenses	698
		Estimated Warranty Liability		698
		(Being warranty liability accounted for on Dec 31 sales for 60 days)

	Jan 7	Cash	2,000
		Sales		2,000
		(Being 40 grinders sold for cash)

	Jan 21	Estimated Warranty Liability	698
		Warranty Expenses	166
		Inventory		864
		(Being 36 grinders costing $24 each replaced under warranty and warranty expenses charged)

	Jan 31	Warranty Expenses	34
		Estimated Warranty Liability		34
		(Being warranty liability accounted for on Jan 7 sales for 60 days)

Explanation of Solution

On Nov 30, Warranty expenses have been calculated as 10% of sales revenue.

Warranty expenses= 10% of2500 =$250

On Dec 12, the warranty liability written back = 6*24 =$144 (6 grinders at unit cost of $24 each)

On Dec 28, the amount of inventory issued under warranty= 17*24 =$408

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106

Since, $106 is available under Warranty liability account and inventory worth $408 needs to be credited, so balance $302 408−302 is charged off to Warranty Expenses Account.

For December sales, Warranty expenses= 10% of10,000 =$1,000.

Warranty expenses already charged on 29^t^h December =$302.

So, warranty expenses to be charged off on December 31=$ 1000−302 =$698

On Jan 21, the amount of inventory issued under warranty= 36*24 =$864

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106
Dec 28	Less Written Back	106
Dec 31	Balance Created	698
Jan 21	Balance Available	698

Since, $698 is available under Warranty liability account and inventory worth $864 needs to be credited, so balance $166 864−698 is charged off to Warranty Expenses Account

On Jan 31, Total Warranty expenses= 10% of2000 =$200. Warranty Expenses already charged is $166. So, additional $ 34 200−166 needs to be charged off

Thus, the journal entries for the transactions and adjustments have been passed.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 2:

The warranty expenses reported for November and December

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for November is $250 and for December is $ 1,000

Explanation of Solution

The warranty expenses have been calculated as 8% of sales for the month. For November, the warranty expenses are 10% of2500 =$250 and for December the warranty expenses are 10% of10,000 =$1,000.

Thus, the warranty expenses reported for November and December have been reported.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

of the product. Only the plant or factory related expenses are termed as manufacturing overheads.

Requirement 3:

The warranty expenses reported for January

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for January is $200

Explanation of Solution

The warranty expenses have been calculated as 10% of sales for the month. For January, the warranty expenses are 10% of2000 =$200

Thus, the warranty expenses reported for January have been reported.

To determine

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 4:

The balance of Estimated Warranty liability on December 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on December 31 was $698 Cr.

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on December 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 5:

The balance of Estimated Warranty liability on January 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on January 31 was $34 (Cr)

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on January 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

Jan 21	To Inventory	698	Jan 1	By balance b / f	698
Jan 31	To Balance c/d	34	Jan 31	By Warranty Expenses	34

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Answer 2

Question

Chapter 11, Problem 4BPSB

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 1:

To prepare:

Journal entries to account for the entries and adjustments

Expert Solution

Answer to Problem 4BPSB

Lee Co.
Journal Entries

S.no	Date	Accounts	Debit	Credit

	Nov 16	Cash	2,500
		Sales		2,500
		(Being 50 grinders sold for cash)

	Nov 30	Warranty Expenses	250
		Estimated Warranty Liability		250
		(Being warranty liability accounted for on Nov 16 sales for 60 days)

	Dec.12	Estimated Warranty Liability	144
		Inventory		144
		(Being 6 grinders costing $24 each replaced under warranty)

	Dec. 18	Cash	10,000
		Sales		10,000
		(Being 200 grinders sold for cash)

	Dec 28	Estimated Warranty Liability	106
		Warranty Expenses	302
		Inventory		408
		(Being 17 razors costing $24 each replaced under warranty and warranty expenses charged)

	Dec 31	Warranty Expenses	698
		Estimated Warranty Liability		698
		(Being warranty liability accounted for on Dec 31 sales for 60 days)

	Jan 7	Cash	2,000
		Sales		2,000
		(Being 40 grinders sold for cash)

	Jan 21	Estimated Warranty Liability	698
		Warranty Expenses	166
		Inventory		864
		(Being 36 grinders costing $24 each replaced under warranty and warranty expenses charged)

	Jan 31	Warranty Expenses	34
		Estimated Warranty Liability		34
		(Being warranty liability accounted for on Jan 7 sales for 60 days)

Explanation of Solution

On Nov 30, Warranty expenses have been calculated as 10% of sales revenue.

Warranty expenses= 10% of2500 =$250

On Dec 12, the warranty liability written back = 6*24 =$144 (6 grinders at unit cost of $24 each)

On Dec 28, the amount of inventory issued under warranty= 17*24 =$408

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106

Since, $106 is available under Warranty liability account and inventory worth $408 needs to be credited, so balance $302 408−302 is charged off to Warranty Expenses Account.

For December sales, Warranty expenses= 10% of10,000 =$1,000.

Warranty expenses already charged on 29^t^h December =$302.

So, warranty expenses to be charged off on December 31=$ 1000−302 =$698

On Jan 21, the amount of inventory issued under warranty= 36*24 =$864

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106
Dec 28	Less Written Back	106
Dec 31	Balance Created	698
Jan 21	Balance Available	698

Since, $698 is available under Warranty liability account and inventory worth $864 needs to be credited, so balance $166 864−698 is charged off to Warranty Expenses Account

On Jan 31, Total Warranty expenses= 10% of2000 =$200. Warranty Expenses already charged is $166. So, additional $ 34 200−166 needs to be charged off

Thus, the journal entries for the transactions and adjustments have been passed.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 2:

The warranty expenses reported for November and December

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for November is $250 and for December is $ 1,000

Explanation of Solution

The warranty expenses have been calculated as 8% of sales for the month. For November, the warranty expenses are 10% of2500 =$250 and for December the warranty expenses are 10% of10,000 =$1,000.

Thus, the warranty expenses reported for November and December have been reported.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

of the product. Only the plant or factory related expenses are termed as manufacturing overheads.

Requirement 3:

The warranty expenses reported for January

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for January is $200

Explanation of Solution

The warranty expenses have been calculated as 10% of sales for the month. For January, the warranty expenses are 10% of2000 =$200

Thus, the warranty expenses reported for January have been reported.

To determine

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 4:

The balance of Estimated Warranty liability on December 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on December 31 was $698 Cr.

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on December 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 5:

The balance of Estimated Warranty liability on January 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on January 31 was $34 (Cr)

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on January 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

Jan 21	To Inventory	698	Jan 1	By balance b / f	698
Jan 31	To Balance c/d	34	Jan 31	By Warranty Expenses	34

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Answer 3

Question

Chapter 11, Problem 4BPSB

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 1:

To prepare:

Journal entries to account for the entries and adjustments

Expert Solution

Answer to Problem 4BPSB

Lee Co.
Journal Entries

S.no	Date	Accounts	Debit	Credit

	Nov 16	Cash	2,500
		Sales		2,500
		(Being 50 grinders sold for cash)

	Nov 30	Warranty Expenses	250
		Estimated Warranty Liability		250
		(Being warranty liability accounted for on Nov 16 sales for 60 days)

	Dec.12	Estimated Warranty Liability	144
		Inventory		144
		(Being 6 grinders costing $24 each replaced under warranty)

	Dec. 18	Cash	10,000
		Sales		10,000
		(Being 200 grinders sold for cash)

	Dec 28	Estimated Warranty Liability	106
		Warranty Expenses	302
		Inventory		408
		(Being 17 razors costing $24 each replaced under warranty and warranty expenses charged)

	Dec 31	Warranty Expenses	698
		Estimated Warranty Liability		698
		(Being warranty liability accounted for on Dec 31 sales for 60 days)

	Jan 7	Cash	2,000
		Sales		2,000
		(Being 40 grinders sold for cash)

	Jan 21	Estimated Warranty Liability	698
		Warranty Expenses	166
		Inventory		864
		(Being 36 grinders costing $24 each replaced under warranty and warranty expenses charged)

	Jan 31	Warranty Expenses	34
		Estimated Warranty Liability		34
		(Being warranty liability accounted for on Jan 7 sales for 60 days)

Explanation of Solution

On Nov 30, Warranty expenses have been calculated as 10% of sales revenue.

Warranty expenses= 10% of2500 =$250

On Dec 12, the warranty liability written back = 6*24 =$144 (6 grinders at unit cost of $24 each)

On Dec 28, the amount of inventory issued under warranty= 17*24 =$408

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106

Since, $106 is available under Warranty liability account and inventory worth $408 needs to be credited, so balance $302 408−302 is charged off to Warranty Expenses Account.

For December sales, Warranty expenses= 10% of10,000 =$1,000.

Warranty expenses already charged on 29^t^h December =$302.

So, warranty expenses to be charged off on December 31=$ 1000−302 =$698

On Jan 21, the amount of inventory issued under warranty= 36*24 =$864

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106
Dec 28	Less Written Back	106
Dec 31	Balance Created	698
Jan 21	Balance Available	698

Since, $698 is available under Warranty liability account and inventory worth $864 needs to be credited, so balance $166 864−698 is charged off to Warranty Expenses Account

On Jan 31, Total Warranty expenses= 10% of2000 =$200. Warranty Expenses already charged is $166. So, additional $ 34 200−166 needs to be charged off

Thus, the journal entries for the transactions and adjustments have been passed.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 2:

The warranty expenses reported for November and December

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for November is $250 and for December is $ 1,000

Explanation of Solution

The warranty expenses have been calculated as 8% of sales for the month. For November, the warranty expenses are 10% of2500 =$250 and for December the warranty expenses are 10% of10,000 =$1,000.

Thus, the warranty expenses reported for November and December have been reported.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

of the product. Only the plant or factory related expenses are termed as manufacturing overheads.

Requirement 3:

The warranty expenses reported for January

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for January is $200

Explanation of Solution

The warranty expenses have been calculated as 10% of sales for the month. For January, the warranty expenses are 10% of2000 =$200

Thus, the warranty expenses reported for January have been reported.

To determine

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 4:

The balance of Estimated Warranty liability on December 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on December 31 was $698 Cr.

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on December 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 5:

The balance of Estimated Warranty liability on January 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on January 31 was $34 (Cr)

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on January 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

Jan 21	To Inventory	698	Jan 1	By balance b / f	698
Jan 31	To Balance c/d	34	Jan 31	By Warranty Expenses	34

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Answer 4

Question

Chapter 11, Problem 4BPSB

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 1:

To prepare:

Journal entries to account for the entries and adjustments

Expert Solution

Answer to Problem 4BPSB

Lee Co.
Journal Entries

S.no	Date	Accounts	Debit	Credit

	Nov 16	Cash	2,500
		Sales		2,500
		(Being 50 grinders sold for cash)

	Nov 30	Warranty Expenses	250
		Estimated Warranty Liability		250
		(Being warranty liability accounted for on Nov 16 sales for 60 days)

	Dec.12	Estimated Warranty Liability	144
		Inventory		144
		(Being 6 grinders costing $24 each replaced under warranty)

	Dec. 18	Cash	10,000
		Sales		10,000
		(Being 200 grinders sold for cash)

	Dec 28	Estimated Warranty Liability	106
		Warranty Expenses	302
		Inventory		408
		(Being 17 razors costing $24 each replaced under warranty and warranty expenses charged)

	Dec 31	Warranty Expenses	698
		Estimated Warranty Liability		698
		(Being warranty liability accounted for on Dec 31 sales for 60 days)

	Jan 7	Cash	2,000
		Sales		2,000
		(Being 40 grinders sold for cash)

	Jan 21	Estimated Warranty Liability	698
		Warranty Expenses	166
		Inventory		864
		(Being 36 grinders costing $24 each replaced under warranty and warranty expenses charged)

	Jan 31	Warranty Expenses	34
		Estimated Warranty Liability		34
		(Being warranty liability accounted for on Jan 7 sales for 60 days)

Explanation of Solution

On Nov 30, Warranty expenses have been calculated as 10% of sales revenue.

Warranty expenses= 10% of2500 =$250

On Dec 12, the warranty liability written back = 6*24 =$144 (6 grinders at unit cost of $24 each)

On Dec 28, the amount of inventory issued under warranty= 17*24 =$408

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106

Since, $106 is available under Warranty liability account and inventory worth $408 needs to be credited, so balance $302 408−302 is charged off to Warranty Expenses Account.

For December sales, Warranty expenses= 10% of10,000 =$1,000.

Warranty expenses already charged on 29^t^h December =$302.

So, warranty expenses to be charged off on December 31=$ 1000−302 =$698

On Jan 21, the amount of inventory issued under warranty= 36*24 =$864

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106
Dec 28	Less Written Back	106
Dec 31	Balance Created	698
Jan 21	Balance Available	698

Since, $698 is available under Warranty liability account and inventory worth $864 needs to be credited, so balance $166 864−698 is charged off to Warranty Expenses Account

On Jan 31, Total Warranty expenses= 10% of2000 =$200. Warranty Expenses already charged is $166. So, additional $ 34 200−166 needs to be charged off

Thus, the journal entries for the transactions and adjustments have been passed.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 2:

The warranty expenses reported for November and December

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for November is $250 and for December is $ 1,000

Explanation of Solution

The warranty expenses have been calculated as 8% of sales for the month. For November, the warranty expenses are 10% of2500 =$250 and for December the warranty expenses are 10% of10,000 =$1,000.

Thus, the warranty expenses reported for November and December have been reported.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

of the product. Only the plant or factory related expenses are termed as manufacturing overheads.

Requirement 3:

The warranty expenses reported for January

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for January is $200

Explanation of Solution

The warranty expenses have been calculated as 10% of sales for the month. For January, the warranty expenses are 10% of2000 =$200

Thus, the warranty expenses reported for January have been reported.

To determine

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 4:

The balance of Estimated Warranty liability on December 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on December 31 was $698 Cr.

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on December 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 5:

The balance of Estimated Warranty liability on January 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on January 31 was $34 (Cr)

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on January 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

Jan 21	To Inventory	698	Jan 1	By balance b / f	698
Jan 31	To Balance c/d	34	Jan 31	By Warranty Expenses	34

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Answer 5

Chapter 11, Problem 4BPSB

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 1:

To prepare:

Journal entries to account for the entries and adjustments

Expert Solution

Answer to Problem 4BPSB

Lee Co.
Journal Entries

S.no	Date	Accounts	Debit	Credit

	Nov 16	Cash	2,500
		Sales		2,500
		(Being 50 grinders sold for cash)

	Nov 30	Warranty Expenses	250
		Estimated Warranty Liability		250
		(Being warranty liability accounted for on Nov 16 sales for 60 days)

	Dec.12	Estimated Warranty Liability	144
		Inventory		144
		(Being 6 grinders costing $24 each replaced under warranty)

	Dec. 18	Cash	10,000
		Sales		10,000
		(Being 200 grinders sold for cash)

	Dec 28	Estimated Warranty Liability	106
		Warranty Expenses	302
		Inventory		408
		(Being 17 razors costing $24 each replaced under warranty and warranty expenses charged)

	Dec 31	Warranty Expenses	698
		Estimated Warranty Liability		698
		(Being warranty liability accounted for on Dec 31 sales for 60 days)

	Jan 7	Cash	2,000
		Sales		2,000
		(Being 40 grinders sold for cash)

	Jan 21	Estimated Warranty Liability	698
		Warranty Expenses	166
		Inventory		864
		(Being 36 grinders costing $24 each replaced under warranty and warranty expenses charged)

	Jan 31	Warranty Expenses	34
		Estimated Warranty Liability		34
		(Being warranty liability accounted for on Jan 7 sales for 60 days)

Explanation of Solution

On Nov 30, Warranty expenses have been calculated as 10% of sales revenue.

Warranty expenses= 10% of2500 =$250

On Dec 12, the warranty liability written back = 6*24 =$144 (6 grinders at unit cost of $24 each)

On Dec 28, the amount of inventory issued under warranty= 17*24 =$408

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106

Since, $106 is available under Warranty liability account and inventory worth $408 needs to be credited, so balance $302 408−302 is charged off to Warranty Expenses Account.

For December sales, Warranty expenses= 10% of10,000 =$1,000.

Warranty expenses already charged on 29^t^h December =$302.

So, warranty expenses to be charged off on December 31=$ 1000−302 =$698

On Jan 21, the amount of inventory issued under warranty= 36*24 =$864

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106
Dec 28	Less Written Back	106
Dec 31	Balance Created	698
Jan 21	Balance Available	698

Since, $698 is available under Warranty liability account and inventory worth $864 needs to be credited, so balance $166 864−698 is charged off to Warranty Expenses Account

On Jan 31, Total Warranty expenses= 10% of2000 =$200. Warranty Expenses already charged is $166. So, additional $ 34 200−166 needs to be charged off

Thus, the journal entries for the transactions and adjustments have been passed.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 2:

The warranty expenses reported for November and December

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for November is $250 and for December is $ 1,000

Explanation of Solution

The warranty expenses have been calculated as 8% of sales for the month. For November, the warranty expenses are 10% of2500 =$250 and for December the warranty expenses are 10% of10,000 =$1,000.

Thus, the warranty expenses reported for November and December have been reported.

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

of the product. Only the plant or factory related expenses are termed as manufacturing overheads.

Requirement 3:

The warranty expenses reported for January

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for January is $200

Explanation of Solution

The warranty expenses have been calculated as 10% of sales for the month. For January, the warranty expenses are 10% of2000 =$200

Thus, the warranty expenses reported for January have been reported.

To determine

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 4:

The balance of Estimated Warranty liability on December 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on December 31 was $698 Cr.

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on December 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 5:

The balance of Estimated Warranty liability on January 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on January 31 was $34 (Cr)

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on January 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

Jan 21	To Inventory	698	Jan 1	By balance b / f	698
Jan 31	To Balance c/d	34	Jan 31	By Warranty Expenses	34

Answer 6

Chapter 11, Problem 4BPSB

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 1:

To prepare:

Journal entries to account for the entries and adjustments

Expert Solution

Answer to Problem 4BPSB

Lee Co.
Journal Entries

S.no	Date	Accounts	Debit	Credit

	Nov 16	Cash	2,500
		Sales		2,500
		(Being 50 grinders sold for cash)

	Nov 30	Warranty Expenses	250
		Estimated Warranty Liability		250
		(Being warranty liability accounted for on Nov 16 sales for 60 days)

	Dec.12	Estimated Warranty Liability	144
		Inventory		144
		(Being 6 grinders costing $24 each replaced under warranty)

	Dec. 18	Cash	10,000
		Sales		10,000
		(Being 200 grinders sold for cash)

	Dec 28	Estimated Warranty Liability	106
		Warranty Expenses	302
		Inventory		408
		(Being 17 razors costing $24 each replaced under warranty and warranty expenses charged)

	Dec 31	Warranty Expenses	698
		Estimated Warranty Liability		698
		(Being warranty liability accounted for on Dec 31 sales for 60 days)

	Jan 7	Cash	2,000
		Sales		2,000
		(Being 40 grinders sold for cash)

	Jan 21	Estimated Warranty Liability	698
		Warranty Expenses	166
		Inventory		864
		(Being 36 grinders costing $24 each replaced under warranty and warranty expenses charged)

	Jan 31	Warranty Expenses	34
		Estimated Warranty Liability		34
		(Being warranty liability accounted for on Jan 7 sales for 60 days)

Explanation of Solution

On Nov 30, Warranty expenses have been calculated as 10% of sales revenue.

Warranty expenses= 10% of2500 =$250

On Dec 12, the warranty liability written back = 6*24 =$144 (6 grinders at unit cost of $24 each)

On Dec 28, the amount of inventory issued under warranty= 17*24 =$408

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106

Since, $106 is available under Warranty liability account and inventory worth $408 needs to be credited, so balance $302 408−302 is charged off to Warranty Expenses Account.

For December sales, Warranty expenses= 10% of10,000 =$1,000.

Warranty expenses already charged on 29^t^h December =$302.

So, warranty expenses to be charged off on December 31=$ 1000−302 =$698

On Jan 21, the amount of inventory issued under warranty= 36*24 =$864

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106
Dec 28	Less Written Back	106
Dec 31	Balance Created	698
Jan 21	Balance Available	698

Since, $698 is available under Warranty liability account and inventory worth $864 needs to be credited, so balance $166 864−698 is charged off to Warranty Expenses Account

On Jan 31, Total Warranty expenses= 10% of2000 =$200. Warranty Expenses already charged is $166. So, additional $ 34 200−166 needs to be charged off

Thus, the journal entries for the transactions and adjustments have been passed.

Answer 7

Chapter 11, Problem 4BPSB

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 1:

To prepare:

Journal entries to account for the entries and adjustments

Answer 8

Expert Solution

Answer to Problem 4BPSB

Lee Co.
Journal Entries

S.no	Date	Accounts	Debit	Credit

	Nov 16	Cash	2,500
		Sales		2,500
		(Being 50 grinders sold for cash)

	Nov 30	Warranty Expenses	250
		Estimated Warranty Liability		250
		(Being warranty liability accounted for on Nov 16 sales for 60 days)

	Dec.12	Estimated Warranty Liability	144
		Inventory		144
		(Being 6 grinders costing $24 each replaced under warranty)

	Dec. 18	Cash	10,000
		Sales		10,000
		(Being 200 grinders sold for cash)

	Dec 28	Estimated Warranty Liability	106
		Warranty Expenses	302
		Inventory		408
		(Being 17 razors costing $24 each replaced under warranty and warranty expenses charged)

	Dec 31	Warranty Expenses	698
		Estimated Warranty Liability		698
		(Being warranty liability accounted for on Dec 31 sales for 60 days)

	Jan 7	Cash	2,000
		Sales		2,000
		(Being 40 grinders sold for cash)

	Jan 21	Estimated Warranty Liability	698
		Warranty Expenses	166
		Inventory		864
		(Being 36 grinders costing $24 each replaced under warranty and warranty expenses charged)

	Jan 31	Warranty Expenses	34
		Estimated Warranty Liability		34
		(Being warranty liability accounted for on Jan 7 sales for 60 days)

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

On Nov 30, Warranty expenses have been calculated as 10% of sales revenue.

Warranty expenses= 10% of2500 =$250

On Dec 12, the warranty liability written back = 6*24 =$144 (6 grinders at unit cost of $24 each)

On Dec 28, the amount of inventory issued under warranty= 17*24 =$408

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106

Since, $106 is available under Warranty liability account and inventory worth $408 needs to be credited, so balance $302 408−302 is charged off to Warranty Expenses Account.

For December sales, Warranty expenses= 10% of10,000 =$1,000.

Warranty expenses already charged on 29^t^h December =$302.

So, warranty expenses to be charged off on December 31=$ 1000−302 =$698

On Jan 21, the amount of inventory issued under warranty= 36*24 =$864

Balance available under Warranty Liability Account

Nov. 30	Balance Created	$250
Dec 12	Less Written Back	(144)
Dec 28	Balance available	106
Dec 28	Less Written Back	106
Dec 31	Balance Created	698
Jan 21	Balance Available	698

Since, $698 is available under Warranty liability account and inventory worth $864 needs to be credited, so balance $166 864−698 is charged off to Warranty Expenses Account

On Jan 31, Total Warranty expenses= 10% of2000 =$200. Warranty Expenses already charged is $166. So, additional $ 34 200−166 needs to be charged off

Thus, the journal entries for the transactions and adjustments have been passed.

Answer 13

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 2:

The warranty expenses reported for November and December

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for November is $250 and for December is $ 1,000

Explanation of Solution

The warranty expenses have been calculated as 8% of sales for the month. For November, the warranty expenses are 10% of2500 =$250 and for December the warranty expenses are 10% of10,000 =$1,000.

Thus, the warranty expenses reported for November and December have been reported.

Answer 14

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 2:

The warranty expenses reported for November and December

Answer 15

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for November is $250 and for December is $ 1,000

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

The warranty expenses have been calculated as 8% of sales for the month. For November, the warranty expenses are 10% of2500 =$250 and for December the warranty expenses are 10% of10,000 =$1,000.

Thus, the warranty expenses reported for November and December have been reported.

Answer 20

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

of the product. Only the plant or factory related expenses are termed as manufacturing overheads.

Requirement 3:

The warranty expenses reported for January

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for January is $200

Explanation of Solution

The warranty expenses have been calculated as 10% of sales for the month. For January, the warranty expenses are 10% of2000 =$200

Thus, the warranty expenses reported for January have been reported.

Answer 21

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

of the product. Only the plant or factory related expenses are termed as manufacturing overheads.

Requirement 3:

The warranty expenses reported for January

Answer 22

Expert Solution

Answer to Problem 4BPSB

The warranty expenses reported for January is $200

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

The warranty expenses have been calculated as 10% of sales for the month. For January, the warranty expenses are 10% of2000 =$200

Thus, the warranty expenses reported for January have been reported.

Answer 27

To determine

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 4:

The balance of Estimated Warranty liability on December 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on December 31 was $698 Cr.

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on December 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

Answer 28

To determine

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 4:

The balance of Estimated Warranty liability on December 31

Answer 29

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on December 31 was $698 Cr.

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on December 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

Answer 34

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 5:

The balance of Estimated Warranty liability on January 31

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on January 31 was $34 (Cr)

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on January 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

Jan 21	To Inventory	698	Jan 1	By balance b / f	698
Jan 31	To Balance c/d	34	Jan 31	By Warranty Expenses	34

Answer 35

To determine

Concept Introduction:

Warranty liability:

Warranty liability implies the obligation of the seller to repair or replace a defective good supplied to a customer. The warranty expenses are accounted for in the period in which the revenue of the good is recognized as per the matching principle of accounting.

Requirement 5:

The balance of Estimated Warranty liability on January 31

Answer 36

Expert Solution

Answer to Problem 4BPSB

The balance of Estimated Warranty liability on January 31 was $34 (Cr)

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

The balance can be computed by drawing a warranty liability Account

DrWarranty Liability account as on January 31 Cr.

Date	Account	Amount	Date	Account	Account
Nov 30	To Balance c/d	250	Nov 30	By Warranty Expenses	250

Dec 12	To Inventory	144	Dec 1	By balance b / f	250
Dec 28	To Inventory	106	Dec 31	By Warranty Expenses	698
Dec 31	To Balance c/d	698

Jan 21	To Inventory	698	Jan 1	By balance b / f	698
Jan 31	To Balance c/d	34	Jan 31	By Warranty Expenses	34