Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 23E
a.
To determine
State the reason to separately disclose the short and long-term estimated warranty liabilities.
B.
To determine
Prepare the
c.
To determine
State the conditions that must be met in order for a product warranty liability to be reported in the financial statement.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Harbour Company disclosed estimated product warranty payable for comparative years as follows:
(in millions)
Current Year
Prior Year
Current estimated product warranty payable
$11,201
$10,739
Noncurrent estimated product warranty payable
6,813
6,004
Total
$18,014
$16,743
Assume that Harbour's sales were $132,098 million in current Year and that the total paid on warranty claims during the current year was $11,547 million.
a. The distinction between short- and long-term liabilities is important to creditors in order to accurately evaluate the near-term cash the business relative to the quick current assets and other longer-term .
b. Provide the journal entry for the current Year product warranty expense. Enter your answers in millions. If an amount box does not require an entry, leave it blank.
Product Warranty Expense
Product Warranty Payable
c. What two conditions must be met in order for a product…
Accrued Product Warranty
Harbour Company disclosed estimated product warranty payable for comparative years as follows:
(in millions)
Current Year
Prior Year
Current estimated product warranty payable
$11,050
$10,595
Noncurrent estimated product warranty payable
6,721
5,924
Total
$17,771
$16,519
Assume that Harbour's sales were $130,324 million in current Year and that the total paid on warranty claims during the current year was $11,392 million.
a. The distinction between short- and long-term liabilities is important to creditors in order to accurately evaluate the near-term cash the business relative to the quick current assets and other longer-term .
b. Provide the journal entry for the current Year product warranty expense. Enter your answers in millions. If an amount box does not require an entry, leave it blank.
fill in the blank d3bc3bf67fec01d_2
fill in the blank d3bc3bf67fec01d_3
fill in the blank…
Accrued Product Warranty
General Motors Corporation (GM) disclosed estimated product warranty payable for comparative years as follows:
(in millions)
Year 2
Year 1
Current estimated product warranty payable
$3,059
$2,884
Noncurrent estimated product warranty payable
4,327
4,147
Total
$7,386
$7,031
Presume that GM's sales were $135,592 million in Year 2 and that the total paid on warranty claims during Year 2 was $3,000 million.
a. The distinction between short- and long-term liabilities is important to creditors in order to accurately evaluate the near-term cash demands on the business relative to the quick current assets and other longer-term demands .
Feedback
Review the need for a classified balance sheet.
b. Provide the journal entry for the Year 2 product warranty expense.
Product Warranty Expense
Product Warranty Payable
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
Knowledge Booster
Similar questions
- Siomai Company estimates its annual warranty expense as 2% of annual net sales. The following data relate to calendar year 2020:• Net sales- P3,200,000• Warranty liability (debit balance before adjustment) - P10,000• Warranty liability (credit balance after adjustment)- P54,000. Which of the following entries was made to record the 2020 estimated warranty expense? A. DR: Warranty Expense- P54,000 and Retained Earnings- P10,000; CR: Estimated Warranty Liabilities- P64,000 B. DR: Warranty Expense- P64,000; CR: Retained Earnings- P10,000 and Estimated Warranty Liabilities- P54,000 C. DR: Warranty Expense- P44,000; CR: Estimated Warranty Liabilities- P44,000 D. DR: Warranty Expense 64,000; CR: Estimated Warranty Liabilities- P64,000arrow_forwardAn entity normally provides 4% warranty on its products. The provision in the first quarter was for sales amounting to P5,000,000. For the second quarter, a major issue was found on its products and warrantly claims were expected to be 12% for the whole year. Sales for the second quarter amounted to P15,000,000. What amount should be reported as warranty expenses in the interim income statement for the 2nd Quarter? A. 1,800,0002 B. 2,400,000 C. 2,200,000 D. 1,600,000arrow_forwardAccrued Product Warranty Lachgar Industries disclosed estimated product warranty payable for comparative years as follows: ( in millions) Year 2 Year 1 Current estimated product warranty payable $11,272 $10,808 Noncurrent estimated product warranty payable 6,856 6,043 Total $18,128 $16,851 Presume that Lachgar’s sales were $146,889 million in Year 2. Assume that the total paid on warranty claims during Year 2 was $11,621 million. a. The distinction between short- and long-term liabilities is important to creditors in order to accurately evaluate the near-term cash on the business relative to the quick current assets and other longer-term . b. Provide the journal entry for the Year 2 product warranty expense. c. What two conditions must be met in order for a product warranty liability to be reported in the financial statements?arrow_forward
- On June 1, Davis Inc. issued an $85,500, 10%, 120-day note payable to Garcia Company Assume that the fiscal year of Garcia ends June 30. Using a 360-day year in your calculations, what is the amount of interest revenue recognized by Garcia in the following year? When required, round your answer to the nearest dollar. a.$2,161 b.$713 c.$8,550 d.$1,425arrow_forwardOn June 1, Davis Inc. issued an $84,000, 5%, 120-day note payable to Garcia Company. Assume that the fiscal year of Garcia ends June 30. Using the 360-day year, what is the amount of interest revenue (rounded) recognized by Garcia in the following year? a.$4,200 b.$1,600 c.$700 d.$1,050arrow_forwardAt the beginning of the 2021, Titanic Corp. sold 50 units of a merchandise for the year for a total sales price of P3,000,000. These merchandise come with a two year warranty for defects. During the year, the company incurred actual warranty cost at P55,000 Your audit investigation revealed that this transaction was reported in the statement of comprehensive income as Sales at P3,000,000 and warranty expense at P55,000. Assuming that the warranty is considered assurance-type as this is typical to nature of the product being sold, and assuming further that the company estimates that 80% of the units sold shall be returned for the warranty program and that the company shall incur P2,100 in labor and materials cost for each unit returned, what is the correct amount of sales to be reported in the SCI for the period and balance of liability to be reported in the SFP as at the end of 2021? A. 3,000,000 and 84,000. B. 3,000,000 and 29,000 C. 2,880,000 and 29,000 D. 2, 500, 000 and…arrow_forward
- The following events occurred during the year ended 30 June 2020 for Electrical Limited. Electrical’s main product is backed by warranty. Sales of this product for the year totalled $445,000. The opening balance of provision for warranty claims was $12,720. During the year, Electrical’s warranty expense was $38,040 and claims paid to customers totalled $30,240. June sales totalled $312,000. Electrical Ltd. collected GST of 10% on this amount. This is due to be paid to the tax office by the seventh day of the following collection. On 30 June 2020, Electrical Ltd. took out a loan for $130,000 from AUZ Bank. Repayments of principal are scheduled evenly over a five-year period. Interest on the loan is paid in the year it is incurred. Required: For each item, indicate the account name and the amount to be included as a current liability on Electrical’s balance sheet prepared at 30 June 2020. (show your working for your calculation for each amount).arrow_forwardAt the beginning of the 2021. Titanic Corp. sold 50 units of a merchandise for the year for a total sales price of P3,000,000. These merchandise come with a two: year warranty for defects. During the year, the company incurred actual warranty cost at P55,000. Your audit investigation revealed that this transaction was reported in the statement of comprehensive income as Sales at P3,000,000 and warranty expense at P55,000. Assuming that the warranty is considered service-type and that the warranty service is considered a separate performance obligation (which is selling separately at P2,500 per unit) to be performed over two years, what is the correct amount of sales to be reported in the SCI for the period and balance of liability to be reported in the SFP as at the end of 2021? A. 2,880,000 and 120,000 B. 3,000,000 and 60,000 C. 2,880,000 and 60,000 D. 3,000,000 and 29,000arrow_forwardHaeir Co. sells washing machines that carry a three-year warranty against manufacturer's defects. Based on the entity's experience, warranty costs are estimated at P 300 per machine. During the current year, the entity sold 2,400 washing machines and paid warranty costs of P 170,000. What amount should be reported as warranty expense for the years? What amount should be reported as warranty liability at year-end? respectively * A.P 720,000 and P 170,000 B.P 170,000 and P 720,000 C.P 240,000 and P 550,000 D.P 720,000 and P 550,000arrow_forward
- On June 8, Alton Co. issued an $77,100, 7%, 120-day note payable to Seller Co. Assume that the fiscal year of Seller Co. ends June 30. Using a 360-day year in your calculations, what is the amount of interest revenue recognized by Seller in the following year? When required, round your answer to the nearest dollar. $450 $1,469 $900 $5,397arrow_forwardEntity A manufactures high-end home electronics systems. The entity provides a one-year warranty for all products sold. The entity estimated that the warranty cost is P200 per unit sold and reported a liability for estimated warranty cost of P650,000 at the beginning of the year. The entity sold 5,000 units for a total of P9,000,000 and paid warranty claims of P750,000 on current and prior year sales during the current year. What about should be reported as warranty liability at year-end? 350,000 250,000 750,000 900,000arrow_forwardOn July 8, Jones Inc. issued an $84,700, 11%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends July 31. Using a 360-day year, what is the amount of interest expense recognized by Jones in the current fiscal year? When required, round your answer to the nearest dollar. a.$595 b.$1,785 c.$9,317 d.$1,190arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you