INT.ACCT. LL W/CONNECT+PROCTORIO PLUS
10th Edition
ISBN: 9781266374395
Author: SPICELAND
Publisher: MCG
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Chapter 13, Problem 13.12BE
To determine
Warranty
Warranty is assurance provided to a customer by a seller. It is provided against the probable defects that might occur in a product. Warranty for a product is recognized at the time of sale being made.
To determine: The amount to be reported as a liability at the end of the year.
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Exercise 20-14 (Algo) Warranty expense [LO20-4]
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2020 that carry a one-year warranty against manufacturer’s defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 3% of sales. Sales of the sprinklers in 2020 were $3,300,000. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product:
Accrued liability and expense
Warranty expense (3% × $3,300,000)
99,000
Warranty liability
99,000
Actual expenditures (summary entry)
Warranty liability
45,540
Cash (or salaries payable, parts and supplies, etc.)
45,540
In late 2021, the company's claims experience was evaluated and it was determined that claims…
EXERCISE 7
Filmore Company started selling a new product that carried a 2-year warranty against defects. The warranty
provides assurance that the new product will function as intended based on agreed-upon specifications. Based
on past experiences with other products, the estimated warranty costs related to peso sales are computed as
follows:
First year of warranty
3%
Second year of waranty
5%
Total sales and actual warranty repairs for 2019 and 2020 are given:
2019
2020
P 4,200,000
Actual warranty expenditures 148,800
Sales
P 6,960,000
180,000
REQUIRED:
a.) What amount should Fillmore report as its estimated warranty liability as of December 31,2020?
b.) Based on the above data, assuming that sales and repairs occur evenly throughout the year, how much would
be the predicted warranty expense covering 2019 and 2020 sales still under warranty at December 31,2020?
Exercise 13-15 (Algo) Warranties; financial statement effects [LO13-5, 13-6]
Cupola Awning Corporation introduced a new line of commercial awnings in 2024 that carry a two-year warranty against
manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate
3% of sales. Sales and actual warranty expenditures for the first year of selling the product were:
Sales
$ 5,860,000
Actual Warranty
Expenditures
$ 39,750
Required:
1. Does this situation represent a loss contingency?
2. Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of the warranty that should
be recorded during 2024.
3. What amount should Cupola report as a liability at December 31, 2024?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Loss contingency
Does this situation represent a loss contingency?
Required 3
Yes
Answer is not complete.
€ Required 1
Required 2 >
Chapter 13 Solutions
INT.ACCT. LL W/CONNECT+PROCTORIO PLUS
Ch. 13 - What are the essential characteristics of...Ch. 13 - Prob. 13.2QCh. 13 - Bronson Distributors owes a supplier 100,000 on...Ch. 13 - Bank loans often are arranged under existing lines...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Salaries of 5,000 have been earned by employees by...Ch. 13 - Prob. 13.8QCh. 13 - Prob. 13.9QCh. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Long-term obligations usually are reclassified and...Ch. 13 - How do IFRS and U.S. GAAP differ with respect to...Ch. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.17QCh. 13 - Prob. 13.18QCh. 13 - Suppose the analysis of a loss contingency...Ch. 13 - Prob. 13.20QCh. 13 - Distinguish between the accounting treatment of a...Ch. 13 - At December 31, the end of the reporting period,...Ch. 13 - After the end of the reporting period, a...Ch. 13 - Prob. 13.24QCh. 13 - Prob. 13.25QCh. 13 - Prob. 13.26QCh. 13 - Prob. 13.27QCh. 13 - Prob. 13.28QCh. 13 - Bank loan; accrued interest LO132 On October 1,...Ch. 13 - Non-interest-bearing note; accrued interest LO132...Ch. 13 - Determining accrued interest LO132 On July1,...Ch. 13 - Commercial paper LO132 Branch Corporation issued...Ch. 13 - Non-interest-bearing note; effective interest rate...Ch. 13 - Sales tax LO133 DuringDecember, Rainey Equipment...Ch. 13 - Prob. 13.12BECh. 13 - Prob. 13.13BECh. 13 - Contingency LO135, LO136 Skill Hardware is the...Ch. 13 - Contingency LO135, LO136 Bell International can...Ch. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - FASB codification research LO133, LO134, LO135...Ch. 13 - Current noncurrent classification of debt; Sprint...Ch. 13 - Prob. 13.12ECh. 13 - Prob. 13.14ECh. 13 - Extended warranties LO135, LO136 Carnes...Ch. 13 - Disclosures of liabilities Indicate (by letter)...Ch. 13 - Prob. 13.11PCh. 13 - Prob. 13.2DMPCh. 13 - Prob. 13.3DMPCh. 13 - Prob. 13.4DMPCh. 13 - Prob. 13.18DMPCh. 13 - Real World Case 1319 Contingencies LO135 Real...Ch. 13 - Prob. 1CCTCCh. 13 - Prob. 2CCTC
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