Chapter 13, Problem 13.7P

1.

To determine

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 determine

To prepare: The required journal entries for recording accrual for the estimated warranty costs for the current year.

c.

To determine

To prepare: The required journal entries for recording actual repairs for the current year.

d.

To determine

To prepare: The required journal entries for recording service-type warranty contract sales for the current year.

e.

To determine

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 determine

To prepare: The required journal entries for recording actual repairs for the first year under service-type warranty.

2.

To determine

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 determine

To prepare: The journal for recording estimated liability under the assurance type of warranty for the next year.