Vroom Vacuums sells the Tornado vacuum cleaner. Each Tornado has a one-year warranty that covers any product defects. When customers purchase a Tornado, they also have the option to purchase an extended three-yearwarranty that covers any breakage or maintenance. The extended warranty sells for the same amount regardlessof whether it is purchased at the same time as the Tornado or at some other time. How many performance obligations exist in the implied contract for the purchase of a vacuum cleaner?

Vroom Vacuums sells the Tornado vacuum cleaner. Each Tornado has a one-year warranty that covers any product defects. When customers purchase a Tornado, they also have the option to purchase an extended three-yearwarranty that covers any breakage or maintenance. The extended warranty sells for the same amount regardlessof whether it is purchased at the same time as the Tornado or at some other time. How many performance obligations exist in the implied contract for the purchase of a vacuum cleaner?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 10RE

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On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
Vroom Vacuums sells the Tornado vacuum cleaner. Each Tornado has a one-year warranty that covers any product defects. When customers purchase a Tornado, they also have the option to purchase an extended three-year warranty that covers any breakage or maintenance. The extended warranty sells for the same amount regardless of whether it is purchased at the same time as the Tornado or at some other time.How many performance obligations exist in the implied contract for the purchase of a vacuum cleaner? Identify the best description of each performance obligation from the following list. (You may select more than one answer.) Delivery of vacuum cleaner The one-year quality-assurance warranty The option to purchase the three-year extended warranty Purchase of vacuum cleaner
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Brooks Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2020, the corporation sells for cash 400 computers at a unit price of $2,500. On the basis of past experience, the 2-year warranty costs are estimated to be $155 for parts and $185 for labor per unit. (For simplicity, assume that all sales occurred on December 31, 2020.) The warranty is not sold separately from the computer. Instructions a. Record any necessary journal entries in 2020. b. What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified? c. In 2021, the actual warranty costs to Brooks Corporation were $21,400 for parts and $39,900 for labor. Record any necessary journal entries in 2021.
Nash Company sells televisions at an average price of $838 and also offers to each customer a separate 3-year warranty contract for $81 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 303 televisions and 243 warranty contracts for cash. It estimates the 3-year warranty costs as $19 for parts and $39 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty revenues occurs. 1). What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified? 2) In 2021, Nash Company incurred actual costs relative to 2020 television warranty sales of $2,010 for parts and $3,950 for labor.Record any necessary journal entries in 2021 relative to 2020 television warranties. Use "Inventory" account to record the warranty expense. ( Account Titles and Explanation Debit Credit…
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Blossom Company sells televisions at an average price of $856 and also offers to each customer a separate 3-year warranty contract for $93 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 306 televisions and 256 warranty contracts for cash. It estimates the 3-year warranty costs as $21 for parts and $31 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty revenues occurs. Part 1 Record any necessary journal entries in 2020. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) What liability relative to these transactions would appear on the December 31, 2020, balance sheet and how would it be classified? In 2021, Blossom Company incurred actual costs relative to 2020 television…