Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,100 and $900
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Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,100 and $900, respectively. The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a
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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.On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp. The contract ends on March 31, 2020, and has a monthly payment of 3,200. The contract does not include any stipulations for additional periods. On June 1, Grahams WeedFeed and BigData sign a new 12-month contract that is retroactive to April 1, 2020. The monthly fee for the new contract is 4,000 per month and is also retroactive to April 1, 2020. During April and May of 2020, while the new contract was being negotiated, Grahams Weed Feed continued to maintain the grounds, and BigData continued to pay 3,200 per month. BigData was satisfied with Grahams WeedFeeds performance, and the only issue during negotiations was the monthly fee. Required: Determine if a valid contract exists between Grahams WeedFeed and BigData during April and May 2020.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.)
- Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,100 and $900, respectively. The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a credit to Unearned Warranty Revenue, $900. debit to Warranty Liability, $350. debit to Warranty Expense, $900. credit to Warranty Liability, $900.Oriole Inc. manufactures and sells computers that include an assurance-type warranty for the first 90 days. Oriole offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance-type warranty. Because the optional extended coverage plan is sold separately, Oriole determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,830 on October 1, 2017, and Oriole determines the standalone selling price of each is $3,420 and $410, respectively. Further, Oriole estimates, based on historical experience, it will incur $190 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,440. Assume that the $190 in costs to repair defects in the computers occurred on October 25, 2017. (a) Prepare the journal entry(ies) to…Dos Passos Company sells televisions at an average price of $900 and also offers to each customer a separate 3-year warranty contract for $90 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 300 televisions and 270 warranty contracts for cash. It estimates the 3-year warranty costs as $20 for parts and $40 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty revenues occurs. Instructions a. Record any necessary journal entries in 2020. b. What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified? In 2021, Dos Passos Company incurred actual costs relative to 2020 television warranty sales of $2,000 for parts and $4,000 for labor. c. Record any necessary journal entries in 2021 relative to 2020 television warranties. d. What amounts relative to the 2020…
- Celopatra Corporation introduced a new line of home shades in 2021 that carry a two-year warranty against manufacturer’s defects. Based on their experience with previous product introduction, warranty costs are expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales $5,000,000; Actual warranty $37,500. Additionally, at the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During 2021, Celopatra received $412,000 for these extended warranties (approximately evenly throughout the year). REQUIRED: Does the above situation represents a loss contingency? Why or why not? How should Celopatra account for it? Prepare journal entries that summarizes sales of the home shades (assume all credit sales) and any aspects of the warranty that should be recorded during 2021? What amount should Celopatra report as a liability at December 31, 2021? Prepare…On January 1, 2023, Sunland Ltd. sold on account 1,400 units of its product for a total price of $537,000 with a warranty guarant that the products were free of any defects. The products have a one-year assurance-type warranty and Sunland estimates that th cost will be $25,800. The cost of the units is $447,000. In addition, the company sold extended warranties related to 400 units for one-year period beyond the one-year assurance period at a cost of $15,200. By the company's year-end, December 31, 2023, no warranty costs were incurred. By the company's year-end, December 31, 2024, $9,545 of warranty costs were incurred and paid cash. Prepare the appropriate journal entries for 2023 and 2024.Blossom Company sells televisions at an average price of $856 and also offers to each customer a separate 3-year warranty contract for $93 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 306 televisions and 256 warranty contracts for cash. It estimates the 3-year warranty costs as $21 for parts and $31 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty revenues occurs. Part 1 Record any necessary journal entries in 2020. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified? In 2021, Blossom Company incurred actual costs relative to 2020 television…
- Nash Company sells televisions at an average price of $838 and also offers to each customer a separate 3-year warranty contract for $81 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 303 televisions and 243 warranty contracts for cash. It estimates the 3-year warranty costs as $19 for parts and $39 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty revenues occurs. 1). What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified? 2) In 2021, Nash Company incurred actual costs relative to 2020 television warranty sales of $2,010 for parts and $3,950 for labor.Record any necessary journal entries in 2021 relative to 2020 television warranties. Use "Inventory" account to record the warranty expense. ( Account Titles and Explanation Debit Credit…Nash Company sells televisions at an average price of $838 and also offers to each customer a separate 3-year warranty contract for $81 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 303 televisions and 243 warranty contracts for cash. It estimates the 3-year warranty costs as $19 for parts and $39 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty revenues occurs. 1) What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified? Nash CompanyBalance Sheet (Partial) For the Year Ended December 31, 2020December 31, 2020For the Month Ended December 31, 2020 Current AssetsCurrent LiabilitiesIntangible AssetsLong-term…Consumer Corp. sells dishwashers and washing machines that come with a two-year unlimited warranty on parts and labour for repairs. The warranty is intended to assure customers that the appliances will operate as advertised. The warranty is expected to cost 4% of sales in the first year and 6% of sales in the second year, for a total of 10%. The provision for warranty has a credit balance of $161,000 at the beginning of 20X5. The following events and decisions relate to the warranty: 20X5 Sales revenue of $4,750,000 was generated from products covered by the warranty. Both the sale and the warranty provision must be recorded. 20X5 Warranty work consumed parts inventory with a cost of $8,500, and labour of $35,000. 20X6 Sales revenue from products covered by the warranty were $6,750,000. Both the sale and the warranty provision must be recorded. 20X6 Sales revenue of $6,750,000 was generated from products covered by the warranty. Warranty work…
