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

128361 MENTS was extracted by as at 30 June 2018. als to agree. 30 June 2018 Dr with each other. Trial Balance as at 31 December 2017 32.7X D. Fearon extracted the following trial balance from his books. He could not get the totals to agree Dr Cr Cr $ $ $ $ 87,050 Capital 25,621 62,400 Drawings 13,690 110° 305 410 Sales 94,630 Multiple Each multipl answers: (A) question and (B), (C) or (D piece of pape of questions written atter When you your answer 3,168 Purchases 258 60,375 61 A debit 595 Returns inwards and outwards 1,210 1,109 10,000-35 Wages and salaries 2,000 14,371 12,490 Sundry expenses чут -598 8,120 5,045 Inventory 1.1.2017 8,792 168 account (A) we (B) we (C) we h that 6,790+85 Accounts receivable and accounts 16811,370 4,290 (D) we payable 4,520 Loan from J. Chandler 2000 62 Inventor 5,000 17,017 Equipment 16,000 period is 1,134 Bank 1500 (A) carri 5,790 109,522 109,522 Suspense (B) carri 1,546 (C) tran 132,196 132,196 nd: by $350. ercast by $100. 50, have been entered in n…

None

Ans

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