Talks-A-Lot, Inc. sells cell phones to customers and expects that 10% of phones sold will be returned for repair under its warranty program. The average repair cost is $73 per phone. For 2021, Talks-A-Lot has sold 650 cell phones and has repaired 14 of them as of December 31, 2021. What amount of warranty liability should be reported at December 31, 2021? (Do not round intermediate calculations.)
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- Problem 1 In 2020, Plumpton Company started selling new computer that carried a 2-year warranty against defects Based on the manufacturer's recommendations, the entity estimated warranty cost as a percentage of sales. First year of warranty Second year of warranty 3% 9% Sales and actual warranty repairs are as follows: Sales Actual warranty repairs 2020 P5.000.000 100.000 2021 P7.000.000 250.000 1. How much is the warranty expense for 2020? 2. How much is the estimated warranty liability for 2021 ?(M1) Problem 8-79A (Algorithmic) Warranties Mason Auto Repair specializes in the repair of foreign car transmissions. To encourage business, Mason offers a 6-month warranty on all repairs. The following data are available for 2019: Transmissions repaired, 2019 3,400 Expected frequency of warranty claims 0.03 per repair Actual warranty claims, 2019 $38,000 Estimated warranty liability, 1/1/19 $30,200 Estimated cost of each warranty claim $340 Assume that warranty claims are paid in cash. Required: Question Content Area 1. Compute the warranty expense for 2019. $fill in the blank 84c914063045079_1 Question Content Area 2. Prepare the entry to record the payment of the 2019 warranty claims. blank - Select - - Select - (Record payment of claims) Question Content Area 3. Conceptual Connection: What is the December 31, 2019, balance in the estimated warranty liability account? $fill in the blank 86ed56039fddf91_1 Why has the balance in the estimated warranty liability account changed from…Problem 1 In 2020, Plumpton Company started selling new computer that carried a 2-year warranty against defects Plumpton sold P5,000,000 computers evenly throughout 2020. 50% of the sales are expected to be repaired in 2020 and the rest in 2021. The entity estimated that 80% of the products will have no defects. 5% will have major defects and 15% will have minor defects. If all products were to have major defects the total cost would be 2,000,000. But, if all products were to have minor defects the total repairs would only cost 500,000. The appropriate risk-adjustment factor should be 5% for the probability weighted estimated cash flows. How much is the warranty expense for 2020?
- Question: 1. Johnson company sells a blender for $40 that costs them $16. The company provides a 5 year warranty which they will replace any blenders that quit functioning for the customers. For sales in 2021, they anticipate 1,800 blenders will be returned in for replacement. Make the journal entry for 2021 warranty expense. 2. During 2021, 1,300 blenders quit working and had to be replaced by Johnson.4B Serba Mantul Bhd (SMB) produces coffee makers machine named “Mantop EspressoMachine” (MEM). The Covid-19 pandemic has changed consumer behavior, and demand for the product has increased. SMB reported an increase in sales for the twoyears (2020-2021). The company provides a two-year warranty for all sales of MEM. The following are the details of sales and warranty claims:1. Total sales of MEM for year 2020 and 2021 were RM1,200,000 and RM1,900,000,respectively.2. Total warranty claims in 2021 for MEM that were sold in the previous year wasRM120,000.3. Total warranty claims for the year 2021was RM500,000.4. It is estimated that the maximum amount of warranty claims for the second yearwould only be 15% of the current year sales.The accounting year of the company ends on 31 December. REQUIRED:(a) Prepare necessary journal entries to record the warranty claims and provisions forthe year 2021.(b) “Provisions are certain amount allocated toward probable, but not certain,…Exhibit 9-2In 2015, the Magtag Company sold 16,000 ovens. Magtag estimated that 14% of the machines would require repairs under the two-year assurance-type warranty at an average cost of $60. During 2015, Magtag had an actual outlay of $62,000 for repairs under warranty. Magtag uses the GAAP approach of accruing warranty expense (and the related liability) in the year of the sale. Refer to Exhibit 9-2. What amount should the company report for estimated liability under warranties at the end of 2015? A $62,000 B $72,400 C $84,000 D $48,000
- Problem 11 On January 1, 2020, Molina Company sold a special machine that had a cash price of P900,000. The buyer paid P100,000 cash and signed a 4-year note. The note specified that it would be paid off in four equal annual payments of P274,565 each starting on December 31, 2020. The payments include 14% interest. 1. The carrying amount of the receivable on December 31, 2020 isOsman Corp. sells Product CC15 for $126.00 each. Each unit is covered by a three year warranty, and Osman estimates that the average cost of warranty repairs and replacements is $11.26 per unit over the term of the warranty. Osman reports the following data for its first three years of operations: Units sold Actual warranty costs 2023 11,000 $36,000 2024 22,000 $122,000 2025 35,000 $217,000 What is Osman's warranty liability at December 31, 2024?Problem 26 Jem Riane Delos Reyes Bank granted a loan of P3,000,000 to a borrower on January 1, 2021. The terms of the loan were payment in full on December 31, 2026 plus annual interest payment at 8% every December 31. The first interest payment was made on December 31, 2021. However, on December 31, 2021, due to financial difficulties, the borrower informed Freetown Bank that it would probably miss the interest payments for the next two years. After that, the borrower expects to resume the annual interest payment but the principal would be paid on December 31, 2027 or one year late with interest paid for that additional year. Accordingly, the payments from the borrower are scheduled as follows: Date of Flow Cash Flow Amount 12/31/2022 No interest payment Nil 12/31/2023 No interest payment Nil 12/31/2024 Interest payment P 240,000 12/31/2025 Interest payment 240,000 12/31/2026 Interest payment 240,000 12/31/2027 Interest payment 240,000 Principal payment 3,000,000 The…
- YellowCard ASA manufactures accessories for iPods, iPhones, and iPads. It had the following selected transactions during 2019. (For any part of this problem requiring an interest or discount rate, use 10%.) 1. YellowCard provides a 2-year warranty on the quality of its docking stations, which it began selling in 2019. YellowCard estimates that €45,000 will be spent in the future to warranties related to 2019 sales. During 2019, YellowCard spent €6,000 warranty claims. 2. YellowCard has a 1 year €200,000 loan outstanding from UBS. The loan is set to mature on February 28, 2020. YellowCard makes all of its quarterly interest payments (i.e. interest is due on the last days of each February, May, August, and November). For several years, UBS has agreed to extend the loan, as long as the firm maintains an acid-test ratio of at least 1.25 (Hint: the loan has always been extended and refinanced throughout years before 2019). On December 10, 2019, UBS provided YellowCard acommitment letter…5. 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 reflect the uncertainties in the cash flow estimates. Sales of P4,000,000 were made evenly throughout 20x1. The outflows 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? a. 264,857 b. 176,571 c. 105,943 d.52,97141. The following transaction relate to Tool Company’s contingencies. The financial statements are dated December 31, 2023 and were issued on March 31, 2024. Tool’s products carry one –year warranty against manufacturer defects. Based on past experience, warranty costs are expected to be 4% of sales. Sales for 2023 were P2,000,000 and actual warranty cost incurred was P30,000. In December 2023, an NGO filed suit against Tool seeking penalties for violation of clean air laws. Tool’s counsel advised that is probable that the entity will lose the case and that the amount of penalty is P2,000,000. Appropriately, the entity recorded the liability. On January 15, 2024, Tools reached a settlement to pay P1,500,000 in penalty. Tools is the plaintiff in a P4,000,000 suit filed against a supplier. The attorney advised that it is probable that the entity will win the case and that the award is P2,500,000. On March 15, 2024, the court ruled in favor of Tools and received P2,000,000.…