Hidden Hills Company manufactures and sells electronic games. Each game costs $50 to produce, sells for $90, and carries a warranty that provides for free replacement if it fails during the two years following the sale. In the past, 7 percent of the games sold had to be replaced under the warranty. During July, Hidden Hills sold 6,500 games, and 700 games were replaced under the warranty. 1. Prepare a journal entry to record the estimated liability for product warranties during the month. 2. Prepare a journal entry to record the games replaced under warranty during the month.
Hidden Hills Company manufactures and sells electronic games. Each game costs $50 to produce, sells for $90, and carries a warranty that provides for free replacement if it fails during the two years following the sale. In the past, 7 percent of the games sold had to be replaced under the warranty. During July, Hidden Hills sold 6,500 games, and 700 games were replaced under the warranty. 1. Prepare a journal entry to record the estimated liability for product warranties during the month. 2. Prepare a journal entry to record the games replaced under warranty during the month.
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.4AP
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Hidden Hills Company manufactures and sells electronic games. Each game costs $50 to produce, sells for $90, and carries a warranty that provides for free replacement if it fails during the two years following the sale. In the past, 7 percent of the games sold had to be replaced under the warranty. During July, Hidden Hills sold 6,500 games, and 700 games were replaced under the warranty.
1. Prepare a
2. Prepare a journal entry to record the games replaced under warranty during the
month.
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