To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Daun purchased the stereo systems for $270,000 and sold them for $380,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 3 percent of sales. During the year, she paid $4,120 cash to replace a defective tuner. Required a. Prepare an income statement and statement of cash flows for Daun's first year of operation. b. Based on the information given, what is Daun's total warranties liability at the end of the accounting period?
To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Daun purchased the stereo systems for $270,000 and sold them for $380,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 3 percent of sales. During the year, she paid $4,120 cash to replace a defective tuner. Required a. Prepare an income statement and statement of cash flows for Daun's first year of operation. b. Based on the information given, what is Daun's total warranties liability at the end of the accounting period?
Chapter2: Income Tax Concepts
Section: Chapter Questions
Problem 45P
Related questions
Question
Vail Book Mart sells books and other supplies to students in a state where the sales tax rate is 6 percent. Vail Book Mart engaged in the following transactions for Year 1. Sales tax of 6 percent is collected on all sales.
- Book sales, not including sales tax, for Year 1 amounted to $279,000 cash.
- Cash sales of miscellaneous items in Year 1 were $151,000, not including tax.
- Cost of gods sold was $211,000 for the year.
- Paid $130,000 in operating expenses for the year.
- Paid the sales tax collected to the state agency.
Required
- What is the total amount of sales tax Vail Book Mart collected and paid for the year?
- Prepare the
journal entries for the preceding transactions. - What is Vail Book Mart's net income for the year?
Transcribed Image Text:To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations,
Daun purchased the stereo systems for $270,000 and sold them for $380,000 cash. She provided her customers with a one-year
warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 3
percent of sales. During the year, she paid $4,120 cash to replace a defective tuner.
Required
a. Prepare an income statement and statement of cash flows for Daun's first year of operation.
b. Based on the information given, what is Daun's total warranties liability at the end of the accounting period?
Complete this question by entering your answers in the tabs below.
Req A1
Req A
Prepare a statement of cash flows for Daun's first year of operation. (Enter cash outflows and amounts to be deducted with a
minus sign.)
Req B
Cash flows from operating activities:
DAUN'S STEREOS
Statement of Cash Flows
Ending cash balance
Net cash flow from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net change in cash
$
$
$
0
0
01
Transcribed Image Text:To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations,
Daun purchased the stereo systems for $270,000 and sold them for $380,000 cash. She provided her customers with a one-year
warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 3
percent of sales. During the year, she paid $4,120 cash to replace a defective tuner.
Required
a. Prepare an income statement and statement of cash flows for Daun's first year of operation.
b. Based on the information given, what is Daun's total warranties liability at the end of the accounting period?
Complete this question by entering your answers in the tabs below.
Reg A1
Req A2
Req B
Prepare an income statement for Daun's first year of operation.
DAUN'S STEREOS
Income Statement
+
0
0
< Req A1
Req A2 >
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