1. What amount of warranty expense would be charged against 2021 revenue?2. What amount of warranty liability would appear in the December 31, 2021 statement of financial position? Problem 4. Cotyledon Co, an appliance dealer, sells television for P22,200 under a 1-year warranty contract that requires the company to replace all defective parts and toprovide necessary repair labor at no cost to the customers. With sales being madeevenly throughout the year, Cotyledon sells for cash 600 television in 2021 (half of thewarranty expense is incurred in 2021, have in 2022). On the basis of past experience,the 1-year warranty costs are estimated to be P510 parts and P660 labor. Assumethat in 2021, these warranty costs are incurred exactly as estimated.a. What amount of warranty expense would be charged against 2021 revenue?

warranty expenses for 2021 : Total warranty costs =P510(parts) + P660(labour)…

Answered: 1. What amount of warranty expense…

1. What amount of warranty expense would be charged against 2021 revenue? 2. What amount of warranty liability would appear in the December 31, 2021 statement of financial position?

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

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 10RE

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On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
Assurance-Type Warranty Clean-All Inc. sells washing machines with a 3-year assurance-type warranty. In the past, Clean-All has found that in the year after sale, warranty costs have been 3% of sales; in the second year after sale, 5% of sales; and in the third year after sale, 7% of sales. The following data are also available: Required: 1. Prepare the journal entries for the preceding transactions for 20192021. Closing entries are not required. 2. What amount would Clean-All report as a liability on its December 31, 2021, balance sheet, assuming the liability had a balance of 88,200 on December 31, 2018? 3. Next Level How would the failure to recognize a contingent liability affect the financial statements?
Rix Company sells home appliances and provides installation and service for its customers. On April 1, 2019, a customer purchased a dishwasher that Rix normally sells for 1,000. In addition, the customer purchased the installation service and a 3-year service contract, with stand-alone selling prices of 200 and 400, respectively. Because the customer purchased all three items as a bundle, Rix charged the customer 1,400. Required: 1. How should the transaction price be allocated among the products? 2. Prepare the journal entries to recognize revenue related to each product in 2019.
Spath Company borrows 75,000 by issuing a 4-year, noninterest-bearing note to a customer on January 1, 2019. In addition, Spath agrees to sell inventory to the customer at reduced prices over a 5-year period. Spaths incremental borrowing rate is 12%. The customer agrees to purchase an equal amount of inventory each year over the 5-year period so that a straight-line method of revenue recognition is appropriate. Required: Prepare the journal entries on Spaths books for 2019 and 2020. (Round answers to 2 decimal places.)
Accrued Interest On May 1, the Garnett Corporation wanted to purchase a $200,000 piece of equipment, but Garnett was only able to furnish $75,000 of its own cash to purchase the equipment. Garnett borrowed the remainder of the $200,000 from the Peoples National Bank on a 3-year, 4% note. Required: If the company keeps its records on a calendar year, what adjusting entry should Garnett make on December 31?
Case 3Presented below are two (2) independent situations. Answer the questions at the end of each situation.Situation 1Kurama Co., a machinery dealer, sells a machine for P22,200 under a 1-year warranty contract that requiresthe company to replace all defective parts and provide the necessary repair labor at no cost to customers. Withsales being made evenly throughout the year, Kurama sells for cash 600 machines in 20x1 (half of the warrantyexpense is incurred in 20x1, half in 20x2.) Based on previous experience, the 10-year warranty costs areestimated to be P510 and P660 labor. Assume that in 20x1, these warranty costs are incurred exactly asestimated. Required: 1. What amount of warranty expense would be charged against 20x1 revenue? _________2. What amount of warranty liability would appear on the December 31, 20x1 statement of financialposition? __________
Situation 1Kurama Co., a machinery dealer, sells a machine for P22,200 under a 1-year warranty contract that requiresthe company to replace all defective parts and provide the necessary repair labor at no cost to customers. Withsales being made evenly throughout the year, Kurama sells for cash 600 machines in 20x1 (half of the warrantyexpense is incurred in 20x1, half in 20x2.) Based on previous experience, the 10-year warranty costs areestimated to be P510 and P660 labor. Assume that in 20x1, these warranty costs are incurred exactly asestimated. Required: 1. What amount of warranty expense would be charged against 20x1 revenue? _________2. What amount of warranty liability would appear on the December 31, 20x1 statement of financialposition? __________ Situation 2Cuyos, Inc., a dealer of household appliances, sells washing machines at an average price of P8,100. Thecompany also offers each customer a separate 3-year warranty contract for P810 that requires the company toprovide…
4. A business sells 5,000 appliances at P8,000 each, which carry a one-year repair warranty. If minor repairs were to be required to appliances sold in 2022, the repair cost would be P600 each. If major repairs were needed on all goods sold, the cost would be P1,500 each. It is estimated that 40% of goods sold in 2022 will have no defects, 45% will have minor defects, and 15% will have major defects. What amount of provision on product warranty should the company recognize for 2022?
11. ABC Company sells televisions at an average price of P15,000 and also offers a separate 2-year warranty contract for P2,000 that requires the entity to perform periodic services and replace defective parts. In 2022, ABC sold 550 television sets and 400 extended warranty contracts for cash. The entity estimates the two-year warranty costs as P1,200 for parts and P600 for labor and accounts for warranties separately. The sale occurred on December 31, 2022. The entity recognizes income from the warranties based on the actual warranty availed by the customers within the warranty period. Expired warranties are closed to income from warranties. In 2023, 30% of sold warranties were availed by customers, and in the year 2024, only 80% of the remaining warranty contracts were availed. For the year 2024, how much is ABCs net profit from warranty contracts?
The Weeknd Co., a machinery dealer, sells a machine for P22,200 under a 1-year warranty contract that requires the company to replace all defective parts and to provide the necessary repair labor at no cost to the customers. With sales being made evenly throughout the year, The Weekend Co. sells for cash 600 machines in 2020 (half of the warranty expense is incurred in 2020, half in 2021). Based on experience, the 1-year warranty costs are estimated to be P510 parts and P660 labor. Assume that in 2020, these warranty costs are incurred exactly as estimated QUESTIONS: What amount of warranty expense would be charged against 2020 revenue? What amount of warranty liability would be appeared on the December 31,2020, statement of financial position?
Part A: Giordano Corp. sold machinery for $2,000,000 and it was delivered in November 2020. On November 20, the customer informed Giordano Corp. that they were satisfied with the machinery. Giordano Corp. provided a warranty on the machinery for two years from November 20, 2020. The initial estimated warranty cost to Giordano Corp was estimated at $200,000. The stand-alone-value of the warranty is $150,000 and of the machinery is $1,900,000. The machinery can be purchased without the warranty by the customer. What would be the amount of unearned revenue on November 20 recorded by Giordano Corp.? (Round percentages to whole numbers). Show your work. a) Between $1,800,000-$1,900,000 b) Between $150,000-$160,000 c) None of the choices d) Between $140,000 - $147,000 e) Between $1,900,000-$2,000,000
18. ABC Company sells televisions at an average price of P15,000 and also offers a separate 2-year warranty contract for P2,000 that requires the entity to perform periodic services and replace defective parts. In 2022, ABC sold 550 television sets and 400 extended warranty contracts for cash. The entity estimates the two-year warranty costs as P1,200 for parts and P600 for labor and accounts for warranties separately. The sale occurred on December 31, 2022. The entity recognizes income from the warranties based on the actual warranty availed by the customers within the warranty period. Expired warranties are closed to income from warranties. In 2023, 30% of sold warranties were availed by customers. How much is the unearned revenue from warranty contracts to be presented in the statement of financial position as of the year ended 2023?