Old Hampton Company is preparing adjusting entries at December 31. An analysis reveals the following: 1. During December, Old Hampton Company sold 3000 units of a product that carries a 60-day warranty. The sales for this product totaled $100,000. The company expects 4% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be 15$.2. The company has been sued by a disgruntled employee. Legal counsel believes that it is reasonably possible that the company will have to pay $200,000 in damages.3. The company has been named as one of several defendants in a $400,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.4. Employees earn vacation pay rate at 1 day per month. During December, ten employees qualify to vacation pay. Their average daily wage is $90 per employee. InstructionsPrepare adjusting entries, if required for each of the four items. Ex. 191Old Hampton Company is preparing adjusting entries at December 31. An analysis reveals thefollowing:1. During December, Old Hampton Company sold 3,000 units of a product that carries a 60-daywarranty. The sales for this product totaled $100,000. The company expects 4% of the unitsto need repair under the warranty and it estimates that the average repair cost per unit will be$15.2. The company has been sued by a disgruntled employee. Legal counsel believes that it isreasonably possible that the company will have to pay $200,000 in damages.3. The company has been named as one of several defendants in a $400,000 damage suit.Legal counsel believes it is unlikely that the company will have to pay any damages.4. Employees earn vacation pay at a rate of 1 day per month. During December, ten employeesqualify for vacation pay. Their average daily wage is $90 per employee.InstructionsPrepare adjusting entries, if required, for each of the four items.

Journal Entry - It is record of every business transactions in day to day life over a particular…

Answered: Old Hampton Company is preparing…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 56BE

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Question

Old Hampton Company is preparing adjusting entries at December 31. An analysis reveals the following:

1. During December, Old Hampton Company sold 3000 units of a product that carries a 60-day warranty. The sales for this product totaled $100,000. The company expects 4% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be 15$.

2. The company has been sued by a disgruntled employee. Legal counsel believes that it is reasonably possible that the company will have to pay $200,000 in damages.

3. The company has been named as one of several defendants in a $400,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.

4. Employees earn vacation pay rate at 1 day per month. During December, ten employees qualify to vacation pay. Their average daily wage is $90 per employee.

Instructions

Prepare adjusting entries, if required for each of the four items.