Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Chapter 10, Problem 10DQ
To determine
Record cost of repairing a defective product.
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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
$67,500
Chato 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?
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.
Chapter 10 Solutions
Financial And Managerial Accounting
Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Installment notes require equal periodic payments....Ch. 10 - Prob. 9DQCh. 10 - Prob. 10DQ
Ch. 10 - On January 26, Nyree Co. borrowed cash from Conrad...Ch. 10 - Prob. 2BECh. 10 - The payroll register of Heritage Co. indicates...Ch. 10 - Prob. 4BECh. 10 - Prob. 5BECh. 10 - Journalizing installment notes On the first day of...Ch. 10 - Estimated warranty liability Quantas Industries...Ch. 10 - Adieu Company reported the following current...Ch. 10 - Bon Nebo Co. sold 30,000 annual subscriptions of...Ch. 10 - Entries for notes payable Bennett Enterprises...Ch. 10 - Evaluating alternative notes A borrower has two...Ch. 10 - A business issued a 120-day, 5% note for 60,000 to...Ch. 10 - A business issued a 60-day note for 60,000 to a...Ch. 10 - Fixed asset purchases with note On June 30,...Ch. 10 - Prob. 7ECh. 10 - An employee earns 30 per hour and 1.5 times that...Ch. 10 - Prob. 9ECh. 10 - Summary payroll data In the following summary of...Ch. 10 - According to a summary of the payroll of Mountain...Ch. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Prob. 18ECh. 10 - Entries for installment note transactions On the...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Prob. 21ECh. 10 - Prob. 22ECh. 10 - Prob. 23ECh. 10 - Prob. 24ECh. 10 - The following items were selected from among the...Ch. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Ehrlich Co. began business on January 2. Salaries...Ch. 10 - Prob. 4PACh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Liability transactions The following items were...Ch. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Wage and tax statement data and employer FICA tax...Ch. 10 - Prob. 4PBCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 1COMPCh. 10 - Amazon.com, Inc. (AMZN) is one of the largest...Ch. 10 - Prob. 2MADCh. 10 - Prob. 3MADCh. 10 - Neiman Marcus Group (NMG) is one of the largest...Ch. 10 - Prob. 5MADCh. 10 - Prob. 1TIFCh. 10 - Prob. 2TIFCh. 10 - Communication WBM Motorworks is a manufacturer of...Ch. 10 - Prob. 5TIF
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- 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. ) 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…arrow_forwardIn 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?Answerarrow_forwardIn 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.arrow_forward
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