Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 20, Problem 20.14E
Warranty expense
• LO20–4
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2017 that carry a one-year warranty against manufacturer’s defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 2% of sales. Sales of the sprinklers in 2017 were $2,500,000. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product:
In late 2018, the company’s claims experience was evaluated and it was determined that claims were far more than expected—3% of sales rather than 2%.
Required:
1. Assuming sales of the sprinklers in 2018 were $3,600,000 and warranty expenditures in 2018 totaled $88,000, prepare any
2. Assuming sales of the sprinklers were discontinued after 2017, prepare any journal entries in 2018 related to the warranty.
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Problem 6-2 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5]
Creative Computing sells a tablet computer called the Protab. The $890 sales price of a Protab Package includes the following:
• One Protab computer.
• A 6-month limited warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements
associated with defective products for up to six months.
• A coupon to purchase a Creative Probook e-book reader for $145, a price that represents a 50% discount from the regular Probook
price of $290. It is expected that 25% of the discount coupons will be utilized.
• A coupon to purchase a one-year extended warranty for $65. Customers can buy the extended warranty for $65 at other times as
well. Creative estimates that 35% of customers will purchase an extended warranty.
• Creative does not sell the Protab without the limited warranty, option to purchase a Probook, and the option to purchase an
extended warranty, but estimates…
81
PROBLEMS
Problem 3-1 (IAA)
repair warranty The sale price for each set is P15,000. The
average repair cost per set is P800.
Research has shown that 20% of all sets sold are repaired in
thế first year and 40% in the second year.
2020
2021
300
500
150,000
Number of sets sold
40,000
Total payments'for warranty repairs
Required:
1. Prepare journal entries in connection with the warranty
using the "expense as incurred" approach.
2. Prepare journał entries in connection with the warranty
using the "accrual" approach.
3. Determiņe the estimated warranty liability on December
31, 2021
4. Analyze the estimated warranty liability account to
ascertain whether actual warranty costs approximate the
estimate. The sales and warrantý repairs are made evenly
during the year.
5. Prepare journal entry to correct the estimated warranty
liability on December 31, 2021.
82
Problem 3-2 (AICPA Adapted)
In 2020, Dare Company bęgan selling
Question 10
A Plus Appliances sells dishwashers with a four-year warranty. In 2019, sales revenue for dishwashers is $94,000. The company estimates warranty expense at 6.5% of
revenues. What is the total estimated warranty payable of A Plus Appliances as of December 31,2019? A Plus Appliances began operating in 2019. (Round your final answer to
the nearest dollar.)
O $1548
O $4230
O $6110
O $3318
11:21 AN
4/22/202
Chapter 20 Solutions
Intermediate Accounting
Ch. 20 - Prob. 20.1QCh. 20 - There are three basic accounting approaches to...Ch. 20 - Prob. 20.3QCh. 20 - Lynch Corporation changes from the...Ch. 20 - Sugarbaker Designs Inc. changed from the FIFO...Ch. 20 - Most changes in accounting principles are recorded...Ch. 20 - Southeast Steel, Inc., changed from the FIFO...Ch. 20 - Prob. 20.8QCh. 20 - Its not easy sometimes to distinguish between a...Ch. 20 - For financial reporting, a reporting entity can be...
Ch. 20 - Prob. 20.11QCh. 20 - Describe the process of correcting an error when...Ch. 20 - Prob. 20.13QCh. 20 - If it is discovered that an extraordinary repair...Ch. 20 - Prob. 20.15QCh. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; average cost method...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 Irwin, Inc.,...Ch. 20 - Prob. 20.5BECh. 20 - Book royalties LO204 Three programmers at Feenix...Ch. 20 - Warranty expense LO204 In 2017, Quapau Products...Ch. 20 - Change in estimate; useful life of patent LO204...Ch. 20 - Prob. 20.9BECh. 20 - Error correction LO206 In 2018, internal auditors...Ch. 20 - Prob. 20.11BECh. 20 - Error correction LO206 In 2018, the internal...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change from the treasury stock method to retired...Ch. 20 - Change in principle; change to the equity method ...Ch. 20 - Prob. 20.5ECh. 20 - FASB codification research LO202 Access the FASB...Ch. 20 - Change in principle; change in inventory cost...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 For...Ch. 20 - Change in depreciation methods LO203 The Canliss...Ch. 20 - Book royalties LO204 Dreighton Engineering Group...Ch. 20 - Loss contingency LO204 The Commonwealth of...Ch. 20 - Warranty expense LO204 Woodmier Lawn Products...Ch. 20 - Prob. 20.15ECh. 20 - Accounting change LO204 The Peridot Company...Ch. 20 - Change in estimate; useful life and residual value...Ch. 20 - Classifying accounting changes LO201 through...Ch. 20 - Error correction; inventory error LO206 During...Ch. 20 - Error corrections; investment LO206 Required: 1....Ch. 20 - Prob. 20.21ECh. 20 - Prob. 20.22ECh. 20 - Prob. 20.23ECh. 20 - Inventory errors LO206 Indicate with the...Ch. 20 - Classifying accounting changes and errors LO201...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - P 20-2 Change in principle; change in method of...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - Change in inventory methods LO202 The Rockwell...Ch. 20 - Change in inventory methods LO202 Fantasy...Ch. 20 - Change in principle; change in depreciation...Ch. 20 - Depletion; change in estimate LO204 In 2018, the...Ch. 20 - Accounting changes; six situations LO201, LO203,...Ch. 20 - Prob. 20.9PCh. 20 - Inventory errors LO206 You have been hired as the...Ch. 20 - Error correction; change in depreciation method ...Ch. 20 - Accounting changes and error correction; seven...Ch. 20 - Prob. 20.13PCh. 20 - Prob. 20.14PCh. 20 - Prob. 20.15PCh. 20 - Prob. 20.16PCh. 20 - Prob. 20.17PCh. 20 - Integrating Case 201 Change to dollar-value LIFO ...Ch. 20 - Prob. 20.2BYPCh. 20 - Prob. 20.3BYPCh. 20 - Analysis Case 204 Change in inventory methods;...Ch. 20 - Prob. 20.5BYPCh. 20 - Prob. 20.6BYPCh. 20 - Analysis Case 208 Various changes LO201 through...Ch. 20 - Analysis Case 209 Various changes LO201 through...Ch. 20 - Prob. 20.10BYPCh. 20 - Prob. 20.11BYPCh. 20 - Prob. 20.12BYPCh. 20 - Prob. 1CCTC
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