S11-3 Accounting for warranty expense and warranty payable Toyota, the car manufacturer, guarantees its vehicles for three years or 100 000 kilometres, whichever comes first. Suppose Toyota's experience indicates that it can expect warranty costs to equal 3% of sales. Assume that Thomson Toyota in Adelaide makes sales of Toyota Corollas totalling $500 000 during 2016, its first year of operations. The business receives cash for 30% of the sales and loans receivable for the remainder. Payments to satisfy customer warranty claims totalled $10000 during 2016. (These payments are not reimbursed by Toyota.) Requirements 1 Record the sales, warranty expense and warranty payments for Thomson Toyota. 2 Post to the Estimated warranty payable T-account. At the end of 2016, how much in warranty costs does Thomson Toyota still expect to pay?

S11-3 Accounting for warranty expense and warranty payable Toyota, the car manufacturer, guarantees its vehicles for three years or 100 000 kilometres, whichever comes first. Suppose Toyota's experience indicates that it can expect warranty costs to equal 3% of sales. Assume that Thomson Toyota in Adelaide makes sales of Toyota Corollas totalling $500 000 during 2016, its first year of operations. The business receives cash for 30% of the sales and loans receivable for the remainder. Payments to satisfy customer warranty claims totalled $10000 during 2016. (These payments are not reimbursed by Toyota.) Requirements 1 Record the sales, warranty expense and warranty payments for Thomson Toyota. 2 Post to the Estimated warranty payable T-account. At the end of 2016, how much in warranty costs does Thomson Toyota still expect to pay?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 7EA: Homeland Plus specializes in home goods and accessories. In order for the company to expand its...

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Homeland Plus specializes in home goods and accessories. In order for the company to expand its business, the company takes out a long-term loan in the amount of $650,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 8.5%. Each year on December 31, the company pays down the principal balance by $80,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year. A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest. B. Compute the interest accrued on December 31 of the first year. C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.
McMasters Inc. specializes in BBQ accessories. In order for the company to expand its business, they take out a long-term loan in the amount of $800,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 9%. Each year on December 31, the company pays down the principal balance by $50,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year. A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest. B. Compute the interest accrued on December 31 of the first year. C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.
Marathon Peanuts converts a $130,000 account payable into a short-term note payable, with an annual interest rate of 6%, and payable in four months. How much interest will Marathon Peanuts owe at the end of four months? A. $2,600 B. $7,800 C. $137,800 D. $132,600
USA, a tire manufacturer, guarantees its tires against defects for five years or 60,000 miles, whichever comes first. Suppose Trail Runner USA can expect warranty costs during the five-year period to add up to 3% of sales. Assume that a Trail Runner USA dealer in Denver, Colorado, made sales of $670,000 during 2018. Trail Runner USA received cash for 35% of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totaled $19,000 during 2018. Record the sales, warranty expense, and warranty payments for Trail Runner USA. Ignore cost of goods sold. Post to the Accrued Warranty Payable T-account. The beginning balance was $16,000. At the end of 2018, how much in accrued warranty payable does Trail Runner USA owe to its customers?
Arthur Company sells 1,000 units of radio sets at P9,000 each for cash. Each radio set is under warranty for one year andthe company has estimated from past experience that warranty cost will probably average P500 per unit and that only60% of the units sold will be returned for repairs. During the year, actual payment incurred for repairs is P180,000.What amount would be recorded as estimated warranty liability at the end of the year?a. 300,000 c. 480,000b. 180,000 d. 120,000
Calm Co. provides warranty for its products. Experience shows that 10% of products sold require warranty repairs and that 70% of the warranty costs are expended in the year of sale and 30% in the following year. Half of the defective products require minor repairs that cost 20% of the sale price, while the other half require major repairs that cost 70% of the sale price. A 3% risk adjustment factor is considered appropriate to reflect the uncertainties in the cash flow estimates. Sales of 4,000,000 were made evenly throughout 20x1. The outflow for repairs in 20x2 (for the products sold in 20x1) are expected to take place on June 30, 20x2. The appropriate discount factor is 0.95238. How much is the warranty provision at December 31, 20x1. 264,857 176,571 105,943 52,971
Charm Company sells 1,000 units of radio sets at P9,000 each for cash. Each radio set is under warranty for one year and the company has estimated from past experience that warranty cost will probably average P500 per unit and that only 60% of the units sold will be returned for repairs. During the year, actual payment incurred for repairs is P180,000. What amount would be recorded as estimated warranty liability at the end of the year? 300,000 480,000 180,000 120,000
General Motors of Canada Limited guarantees automobiles against defects for five years or 160,000 km, whichever comes first. Suppose GM Canada can expect warranty costs during the five-year period to add up to 3% of sales. Assume that Forbes Motors in Waterloo, Ontario, made sales of $2,000,000 on their Buick line during 2020. Forbes received cash for 10% of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totalled $50,000 during 2020. Record the sales, warranty expense, and warranty payments for Forbes. Ignore any reimbursement that Forbes may receive from GM Canada. Post to the Estimated Warranty Payable T-account. The beginning balance was $40,000. At the end of 2020, how much in estimated warranty payable does Forbes owe its customers?
1. General Motors guarantees automobiles against defects for five years or 160,000 km, whichever comes first. Suppose GM can expect warranty costs during the five-year period to add up to 4% of sales. Assume that Forbes Motors made sales of $2,500,000 on their Buick line during 2020. Forbes received cash for 13% of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totalled $75,000 during 2020. Post to the Estimated Warranty Payable T-account. The beginning balance was $43,000. At the end of 2020, how much in estimated warranty payable does Forbes owe its customers?
During 2022, ABC Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 4% within 12 months following sale and 6% in the second 12 months following sale. The company reported sales of P10,000,000 for 2022 and P12,000,000 for 2023. The actual expenditures for warranties amounted to P300,000 for 2022 and P1,100,000 for 2023. What is the estimated warranty liability on Dec. 31, 2023?
During 2014, the company introduced a new product that provides a guarantee for two years in the event of damage. The estimated warranty cost based on sales value is 2% for 12 months and 4% for the following 12 months. Actual sales values and warranty issues for the years ended December 31, 2014 and 2015 are as follows: Sales Guarantee expenditure Actual 2014 $ 800,000 $ 12,000 2015 $ 1,000,000 $ 30,000 Total $ 1,800,000 $ 42,000 As of December 31, 2015, the company must present an estimated warranty obligation of a. $0 b. $10,000 c. $26,000 d. $52,000
In 20X1, Stevens Corp. began a new product line of wearable technology that carries a 24-month warranty against manufacturer defects. Based on industry experience, Stevens expects warranty costs to be an amount equal to approximately 9% of total sales dollars. During 20X1, new sales of this technology totaled $3,000,000. The costs incurred to satisfy warranty claims in 20X1 was $90,000. Required: Answer the following two questions. Question #1: What should Stevens report as the "Warranty Expense" balance on its 20X1 income statement?Answer: Question #2: What should Stevens report as the "Warranty Liability" balance on its balance sheet at 12/31/X1?Answer