The journal for recording warranty for two years on cash basis. Given information: Company’s sales amounted to $10,000,000. Cost of providing warranty is 4% of sales. Duration of providing warranty is 2 years. Repair cost for first year is 218,000 including $150,000 for parts and $68,000 for labor. Repair cost for second year is $230,000 including $148,000 for parts and $82,000 for labor.

Question

Want to see the full answer?

Answer 1

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.10E

a.

To determine

To prepare: The journal for recording warranty for two years on cash basis.

Given information:

Company’s sales amounted to $10,000,000.

Cost of providing warranty is 4% of sales.

Duration of providing warranty is 2 years.

Repair cost for first year is 218,000 including $150,000 for parts and $68,000 for labor.

Repair cost for second year is $230,000 including $148,000 for parts and $82,000 for labor.

b.

To determine

To prepare: The journal for recording warranty for two years on accrual basis.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

General Account ting 5.1

Dunbar Corporation's account balances at December 31 for Accounts Receivable and the related Allowance for Doubtful Accounts are $950,000 and $15,000, respectively. From an analysis of accounts receivable, it is estimated that $38,000 of the December 31 receivables will be uncollectible. After adjustment for the above facts, what would be the net realizable value of accounts receivable?

Answer this Question

Answer 2

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.10E

a.

To determine

To prepare: The journal for recording warranty for two years on cash basis.

Given information:

Company’s sales amounted to $10,000,000.

Cost of providing warranty is 4% of sales.

Duration of providing warranty is 2 years.

Repair cost for first year is 218,000 including $150,000 for parts and $68,000 for labor.

Repair cost for second year is $230,000 including $148,000 for parts and $82,000 for labor.

b.

To determine

To prepare: The journal for recording warranty for two years on accrual basis.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.10E

a.

To determine

To prepare: The journal for recording warranty for two years on cash basis.

Given information:

Company’s sales amounted to $10,000,000.

Cost of providing warranty is 4% of sales.

Duration of providing warranty is 2 years.

Repair cost for first year is 218,000 including $150,000 for parts and $68,000 for labor.

Repair cost for second year is $230,000 including $148,000 for parts and $82,000 for labor.

b.

To determine

To prepare: The journal for recording warranty for two years on accrual basis.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 13, Problem 13.10E

a.

To determine