Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time. Part 1: To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

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Answer 1

Question

Chapter 13, Problem 6CA

To determine

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time.

Part 1:

To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

To determine

Part 2:

To determine how should C. report the suit in its 2017 financial statements and to include disclosures, if any, that should be made in C’s financial statements or notes to accounts.

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's expenses, Gross margin, and Net income?

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

Answer 2

Question

Chapter 13, Problem 6CA

To determine

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time.

Part 1:

To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

To determine

Part 2:

To determine how should C. report the suit in its 2017 financial statements and to include disclosures, if any, that should be made in C’s financial statements or notes to accounts.

Expert Solution & Answer

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Answer 3

Question

Chapter 13, Problem 6CA

To determine

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time.

Part 1:

To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

To determine

Part 2:

To determine how should C. report the suit in its 2017 financial statements and to include disclosures, if any, that should be made in C’s financial statements or notes to accounts.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 13, Problem 6CA

To determine

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time.

Part 1:

To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

To determine

Part 2:

To determine how should C. report the suit in its 2017 financial statements and to include disclosures, if any, that should be made in C’s financial statements or notes to accounts.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 13, Problem 6CA

To determine

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time.

Part 1:

To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

To determine

Part 2:

To determine how should C. report the suit in its 2017 financial statements and to include disclosures, if any, that should be made in C’s financial statements or notes to accounts.

Answer 6

Chapter 13, Problem 6CA

To determine

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time.

Part 1:

To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

Answer 7

Chapter 13, Problem 6CA

To determine

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time.

Part 1:

To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

Answer 8

To determine

Part 2:

To determine how should C. report the suit in its 2017 financial statements and to include disclosures, if any, that should be made in C’s financial statements or notes to accounts.

Answer 9

To determine

Part 2:

To determine how should C. report the suit in its 2017 financial statements and to include disclosures, if any, that should be made in C’s financial statements or notes to accounts.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

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Answer 13

Ch. 13 - Prob. 1Q Ch. 13 - Prob. 2Q Ch. 13 - 3. Why is the liabilities section of the balance...Ch. 13 - Prob. 4Q Ch. 13 - Prob. 5Q Ch. 13 - Prob. 6Q Ch. 13 - Prob. 7Q Ch. 13 - Prob. 8Q Ch. 13 - Prob. 9Q Ch. 13 - Prob. 10Q

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time. Part 1: To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time. Part 1: To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

Part 2: To determine how should C. report the suit in its 2017 financial statements and to include disclosures, if any, that should be made in C’s financial statements or notes to accounts.

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Chapter 13 Solutions

Warranty: Warranty can be defined as a promissory document given by manufacturer to customer promising to replace the product if damaged within a specified period of time.

Part 1:

To determine how should B. Co. report the estimated product warranty costs for each of the two types of merchandise.

Part 2:

To determine how should C. report the suit in its 2017 financial statements and to include disclosures, if any, that should be made in C’s financial statements or notes to accounts.