General Motors Corporation reported $2.6 billion of product warranties in the Current Liabilities section of a recent balance sheet. How would costs of repairing a defective product be recorded?
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General Motors Corporation reported $2.6 billion of product warranties in the Current Liabilities section of a recent
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- East Corp. manufactures stereo systems that carry a two-year warranty against defects. Based on past experience, warranty costs are estimated at 4% of sales for the warranty period. During 2005, stereo system sales totaled $3,000,000, and warranty costs of $67,500 were incurred.In its income statement for the year ended December 31, 2005, East should report warranty expense of: $120,000 $52,500 $60,000 $67,500Chato Company sells electrical goods covered by a one – year warranty for any defects. Of the salesof P70,000,000 for the year, the entity estimated that 3% will have major defects, 5% will have aminor defect and 92% will have no defect. The cost of repairs would be P5,000,000 if all theproducts sold had major defect and P3,000,000 if all had minor defect.What amount should be recognized as a warranty provision?As a standard practice, the company does not recognize a provision for a guarantee of good operation of the products sold. Based on past statistics, the cost of repairing damage of products sold in the fiscal year amounts to € 500 while the cost of repairing damaged products sold in previous years amounts to € 600. If the balance sheet net worth is 5000, what will be the actual net worth at the end of the fiscal year?
- East Corp. manufactures stereo systems that carry a two-year warranty against defects. Based on past experience, warranty costs are estimated at 4% of sales for the warranty period.During 2005, stereo system sales totaled $3,000,000, and warranty costs of $67,500 were incurred.In its income statement for the year ended December 31, 2005, East should report warranty expense of: $67,500 $120,000 $60,000 $52,500 wance as a part of stockholders' equity. In the income statement.a) A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale, the manufacturer undertakes to make good by repair or replacement, manufacturing defects that become apparent within three years from the date of sale. On past experience, it is probable that there will be some claims under the warranties. Past experience suggests that 75% of the goods sold will have no defects, 20% will have minor defects and 5% will have major defects. If minor defects were detected in all products sold, the cost of repairs would be $1,000,000; if major defects were detected in all products sold, the cost would be $4,000,000. Requirements: 1. Do you think a provision should be recognized? Explain your decision 2. If a provision should be recognized, prepare the necessary journal entry to record the liability. (b) During the year ended 30 June 2014, Parent company guarantees borrowings of Subsidiary company which amounts to $1,000,000. At…(a) A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale, the manufacturer undertakes to make good by repair or replacement, manufacturing defects that become apparent within three years from the date of sale. On past experience, it is probable that there will be some claims under the warranties. Past experience suggests that 75% of the goods sold will have no defects, 20% will have minor defects and 5% will have major defects. If minor defects were detected in all products sold, the cost of repairs would be $1,000,000; if major defects were detected in all products sold, the cost would be $4,000,000. Requirements: Do you think a provision should be recognized? Explain your decision
- (a) A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale, the manufacturer undertakes to make good by repair or replacement, manufacturing defects that become apparent within three years from the date of sale. On past experience, it is probable that there will be some claims under the warranties. Past experience suggests that 75% of the goods sold will have no defects, 20% will have minor defects and 5% will have major defects. If minor defects were detected in all products sold, the cost of repairs would be $1,000,000; if major defects were detected in all products sold, the cost would be $4,000,000.prepare necessary journal entry since a provision is recognizedA manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale, the manufacturer undertakes to make good by repair or replacement, manufacturing defects that become apparent within three years from the date of sale. On past experience, it is probable that there will be some claims under the warranties.Past experience suggests that 75% of the goods sold will have no defects, 20% will have minor defects and 5% will have major defects. If minor defects were detected in all products sold, the cost of repairs would be $1,000,000; if major defects were detected in all products sold, the cost would be $4,000,000. ) During the year ended 30 June 2014, Parent company guarantees borrowings of Subsidiary company which amounts to $1,000,000. At the time of the guarantee, Subsidiary’s’ financial position was sound. During the year ended 30 June 2015, the financial condition of Subsidiary company deteriorates and at 30 June 2015 Subsidiary…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
- During the first year of operations, a company granted warranties on its products at an estimated cost of $8,500. The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments.Bizarre Company gives warranties at the time of sale to purchasers of its product. The entity undertakes to make good, by repair or replacement, manufacturing defects that become apparent within one year from the date of sale. Sales of P10,000,000 were made evenly throughout 2011. The expenditures for warranty repairs and replacements for the products sold in 2011 are expected to be made 50% in 2011 and 50% in 2012. The 2012 outflows of economic benefits related to the warranty will take place on June 30, 2012. Experience indicates that 95% of products sold require no warranty repairs, 3% of products sold require minor repairs costing 10% of the sale price, and 2% of products sold require major repairs or replacement costing 90% of sale price. The appropriate discount factor for cash flows expected to occur on June 30, 2012 is 0.95. An appropriate risk adjustment factor to reflect the uncertainties in the cash flow estimates is an increment of 6% to the probability-weighted expected…In 2020, Pluto 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 - 3%Second year of warranty - 9% 2020 2021 Sales 5,000,000 7,000,000 Actual warranty repairs 100,000 250,000 Prepare the necessary journal entries to record this transaction, using the expense as incurred approach, for the years 2020 and 2021.
