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The entity projected the estimated warranty cost as a percent of sales. First year of warranty 4% Second year of warranty 10%   Sales and actual warranty repairs were:                                         2020

The entity projected the estimated warranty cost as a percent of sales. First year of warranty 4% Second year of warranty 10%   Sales and actual warranty repairs were:                                         2020

Financial Accounting: The Impact on Decision Makers
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 9.11E
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In 2020, Dare Company began selling a new calculator that carried a two-year warranty

against defects.

The entity projected the estimated warranty cost as a percent of sales.

First year of warranty 4%

Second year of warranty 10%

 

Sales and actual warranty repairs were:

                                        2020              2021

Sales                                5,000,000      9,000,000

Actual warranty repairs      200,000        560,000

 

Required:

1. Prepare journal entries in connection with the warranty using the "expense as

incurred" approach.

2. Prepare journal entries in connection with the warranty using the "accrual" approach.

3. Determine the estimated warranty liability on December 31, 2021.

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