Kiner Equipment Company sells computers for P2,000 each and also gives cach customer a 2-year warranty. During 2004, the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as P40 for parts and P80 for labor. (Assume all sales occur at December 31, 2004 and warranty obligations are expected to be settled evenly throughout the warranty period.) In 2005, Kiner incurred actual warranty costs relative to 2004 computer sales of P10,000 for parts and 24,000 for labor. Requirements: a. Under the expense warranty treatment, give the entries to reflect the above transactions (accrual method) for 2004 and 2005. b. Under the cash basis method, what are the Warranty Expense balances for 2004 and 2005?
Kiner Equipment Company sells computers for P2,000 each and also gives cach customer a 2-year warranty. During 2004, the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as P40 for parts and P80 for labor. (Assume all sales occur at December 31, 2004 and warranty obligations are expected to be settled evenly throughout the warranty period.) In 2005, Kiner incurred actual warranty costs relative to 2004 computer sales of P10,000 for parts and 24,000 for labor. Requirements: a. Under the expense warranty treatment, give the entries to reflect the above transactions (accrual method) for 2004 and 2005. b. Under the cash basis method, what are the Warranty Expense balances for 2004 and 2005?
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
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 10E
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Kiner Equipment Company sells computers for P2,000 each and also gives cach customer a 2-year warranty. During 2004, the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as P40 for parts and P80 for labor. (Assume all sales occur at December 31, 2004 and warranty obligations are expected to be settled evenly throughout the warranty period.)
In 2005, Kiner incurred actual warranty costs relative to 2004 computer sales of P10,000 for parts and 24,000 for labor.
Requirements:
a. Under the expense warranty treatment, give the entries to reflect the above transactions (accrual method) for 2004 and 2005.
b. Under the cash basis method, what are the Warranty Expense balances for 2004 and 2005?
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