0% of its products sold are brought back to the retailer within one year for major repairs or replacements, and 0.40% of its products sold are brought back for minor repairs under the warranty agreement. The remaining 99.50% of products sold are not brought back for any repair or replacement. The retailer further estimates that a major repair and replacement costs $300 and a minor repair costs $50. The retailer reported a warranty provision of $15,000 on the Statement of Financial Position on 30 June 2019 and incurred an expe
0% of its products sold are brought back to the retailer within one year for major repairs or replacements, and 0.40% of its products sold are brought back for minor repairs under the warranty agreement. The remaining 99.50% of products sold are not brought back for any repair or replacement. The retailer further estimates that a major repair and replacement costs $300 and a minor repair costs $50. The retailer reported a warranty provision of $15,000 on the Statement of Financial Position on 30 June 2019 and incurred an expe
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 15E: On January 1, 2019, Piper Company entered into an agreement with Save-Mart to sell its most popular...
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- An electronic goods retailer sells electronic goods with a standard one-year warranty agreement. The retailer is obligated to remedy any product deficiency through repairs or replacements within one year of the sale. During the year ended 30 June 2020, the retailer sold 50,000 units of products. Based on experience, the retailer estimates that 0.10% of its products sold are brought back to the retailer within one year for major repairs or replacements, and 0.40% of its products sold are brought back for minor repairs under the warranty agreement. The remaining 99.50% of products sold are not brought back for any repair or replacement. The retailer further estimates that a major repair and replacement costs $300 and a minor repair costs $50. The retailer reported a warranty provision of $15,000 on the
Statement of Financial Position on 30 June 2019 and incurred an expenditure of $8,000 to repair and replace products during the year ended 30 June 2020 under the warranty agreement.
Calculate how much new warranty provision the retailer should create during the year ended 30 June 2020
Prepare
Prepare a note showing the reconciliation of warranty provision.
Briefly explain the usefulness of a reconciliation of warranty provision.
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