1.
a.
To prepare: The required journal entries for recording sold wireless router for the current year.
Given information:
Products sold by the company are worth $11,200,000.
Cost of products sold is $5,000,000.
Estimated warranty cost is 4% of the total sales.
Service-type warranties sold 45000 @ $85 per contract.
Customers claimed $286,000 against assurance-type warranty.
Customers claimed $185,000 against service-type warranty.
Company uses perpetual inventory system.
b.
To prepare: The required journal entries for recording accrual for the estimated warranty costs for the current year.
c.
To prepare: The required journal entries for recording actual repairs for the current year.
d.
To prepare: The required journal entries for recording service-type warranty contract sales for the current year.
e.
To prepare: The required journal entries for recording recognition of contract revenue for 3 subsequent years to sale of the service type contracts.
f.
To prepare: The required journal entries for recording actual repairs for the first year under service-type warranty.
2.
The way in which the company classifies the assurance-type warranty and the unearned revenue under the service type warranty contract on the balance sheet at the end of the year of sale.
3.
To prepare: The journal for recording estimated liability under the assurance type of warranty for the next year.
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Intermediate Accounting
- Blake Department Store sells television sets with one-year warranties that cover repair and replacement of television parts. In the month of June, Blake sells forty television sets with a per unit cost of $500. If Blake estimates warranty fulfillment at 10% of sales, what would be the warranty liability reported in June? A. $1,000 B. $2,000 C. $500 D. $20,000arrow_forwardEntity A manufactures high-end home electronics systems. The entity provides a one-year warranty for all products sold. The entity estimated that the warranty cost is P200 per unit sold and reported a liability for estimated warranty cost of P650,000 at the beginning of the year. The entity sold 5,000 units for a total of P9,000,000 and paid warranty claims of P750,000 on current and prior year sales during the current year. What about should be reported as warranty liability at year-end? 350,000 250,000 750,000 900,000arrow_forwardA company manufactures electronic equipment and offers a one-year warranty with each unit sold. For the year, the company sold 25,000 units. Based on historical averages, management expects 4% of the units sold will need warranty work. The estimated warranty cost per unit is $100.Required:Estimate (a) the number of units that will need warranty work and (b) future warranty costs. (c) Prepare the year-end adjusting entry for estimated warranty costs, assuming none of the units sold in the current year required warranty work. (d) Alternatively, prepare the year-end adjusting entry for estimated warranty costs, assuming that 25% of the estimated warranty work has already occurred by the end of the current year. How would your answers change if management’s estimate of warranty work increases to 5% of units sold and the estimated warranty cost per unit increases to $120?arrow_forward
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- Vaibhavarrow_forwardBest Appliance Store offers a two-year warranty on all appliances sold. The company estimates that 5% of all appliances sold need to be serviced at an average cost of $50 each. At December 31, 2020, the Warranty Liability account had a balance of $19,000. During 2021, the store spends $10,000 repairing 200 appliances. An additional 3,500 appliances are sold in 2021. On the 2021 income statement, warranty expense will be: Oa. $8,750 b. $10,000 CC $8,500 d. $9,000arrow_forwardCullumber Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides a one-month warranty that is included in the cost of the computer. Claims under the warranties vary from replacing defective items to providing customers with refunds if they choose. During 2024, the estimated costs related to the one-month warranties was $52,000, of whic $46,800 had been incurred before year end ($39,000 for replacement items and $7,800 in refunds). For an additional charge of $130, Computers Galore also offers extended warranty coverage for two years on its computers. This amount is expected to cover the costs associated with the extended warranties. During 2024, Computers Galore sold 1,040 two-ye warranties. The costs incurred during the year for replacements under these warranties amounted to $40,300. Based on experienc the company estimates that its total warranty costs over the two-year coverage period will be $78,000, which it expects will occur evenly…arrow_forward
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