GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
9th Edition
ISBN: 9781260089042
Author: J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 20, Problem 20.14E
Warranty expense
• LO20–4
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2017 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 2% of sales. Sales of the sprinklers in 2017 were $2,500,000. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product:
In late 2018, the company’s claims experience was evaluated and it was determined that claims were far more than expected—3% of sales rather than 2%.
Required:
1. Assuming sales of the sprinklers in 2018 were $3,600,000 and warranty expenditures in 2018 totaled $88,000, prepare any
2. Assuming sales of the sprinklers were discontinued after 2017, prepare any journal entries in 2018 related to the warranty.
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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 >
4G
10:21
A O N Z8
KB/s : 94
1. During 2019, Yamashita
10 points
Company introduced a new
product carrying a two-year
warranty against defects. The
estimated warranty costs
related to peso sales are 4%
within 12 months following
sale and 6% in the second 12
months following the sale.
The entity reported sales of
P5,000,000 for 2019 and
P6,000,000 for 2020. The
actual expenditures incurred
amounted to P150,000 for
2019 and P550,000 for 2020.
QUESTION: What amount
should be reported as
warranty expense for 2019? *
500,000
200,000
250,000
300,000
2. Durina 2019. Yamashita
10 points
5
Check my work
Exercise 13-16 (Algo) Extended warranties [LO13-5, 13-6]
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase,
customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year,
Carnes received $430,000 for these extended warranties, and on average the warranties were 20% expired by year end.
Required:
1-a. Does this situation represent a loss contingency?
1-b. How should it be accounted for?
2. Prepare journal entries that summarize sales of the extended warranties and recognition of any revenue associated with
those warranties.
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 2
How should it be accounted for?
Revenue is recognized as a(n)
and warranty revenue is computed using the
Req 1A
Req 2 >
Chapter 20 Solutions
GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
Ch. 20 - Prob. 20.1QCh. 20 - There are three basic accounting approaches to...Ch. 20 - Prob. 20.3QCh. 20 - Lynch Corporation changes from the...Ch. 20 - Sugarbaker Designs Inc. changed from the FIFO...Ch. 20 - Most changes in accounting principles are recorded...Ch. 20 - Southeast Steel, Inc., changed from the FIFO...Ch. 20 - Prob. 20.8QCh. 20 - Its not easy sometimes to distinguish between a...Ch. 20 - For financial reporting, a reporting entity can be...
Ch. 20 - Prob. 20.11QCh. 20 - Describe the process of correcting an error when...Ch. 20 - Prob. 20.13QCh. 20 - If it is discovered that an extraordinary repair...Ch. 20 - Prob. 20.15QCh. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; average cost method...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 Irwin, Inc.,...Ch. 20 - Prob. 20.5BECh. 20 - Book royalties LO204 Three programmers at Feenix...Ch. 20 - Warranty expense LO204 In 2017, Quapau Products...Ch. 20 - Change in estimate; useful life of patent LO204...Ch. 20 - Prob. 20.9BECh. 20 - Error correction LO206 In 2018, internal auditors...Ch. 20 - Prob. 20.11BECh. 20 - Error correction LO206 In 2018, the internal...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change from the treasury stock method to retired...Ch. 20 - Change in principle; change to the equity method ...Ch. 20 - Prob. 20.5ECh. 20 - FASB codification research LO202 Access the FASB...Ch. 20 - Change in principle; change in inventory cost...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 For...Ch. 20 - Change in depreciation methods LO203 The Canliss...Ch. 20 - Book royalties LO204 Dreighton Engineering Group...Ch. 20 - Loss contingency LO204 The Commonwealth of...Ch. 20 - Warranty expense LO204 Woodmier Lawn Products...Ch. 20 - Prob. 20.15ECh. 20 - Accounting change LO204 The Peridot Company...Ch. 20 - Change in estimate; useful life and residual value...Ch. 20 - Classifying accounting changes LO201 through...Ch. 20 - Error correction; inventory error LO206 During...Ch. 20 - Error corrections; investment LO206 Required: 1....Ch. 20 - Prob. 20.21ECh. 20 - Prob. 20.22ECh. 20 - Prob. 20.23ECh. 20 - Inventory errors LO206 Indicate with the...Ch. 20 - Classifying accounting changes and errors LO201...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - P 20-2 Change in principle; change in method of...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - Change in inventory methods LO202 The Rockwell...Ch. 20 - Change in inventory methods LO202 Fantasy...Ch. 20 - Change in principle; change in depreciation...Ch. 20 - Depletion; change in estimate LO204 In 2018, the...Ch. 20 - Accounting changes; six situations LO201, LO203,...Ch. 20 - Prob. 20.9PCh. 20 - Inventory errors LO206 You have been hired as the...Ch. 20 - Error correction; change in depreciation method ...Ch. 20 - Accounting changes and error correction; seven...Ch. 20 - Prob. 20.13PCh. 20 - Prob. 20.14PCh. 20 - Prob. 20.15PCh. 20 - Prob. 20.16PCh. 20 - Prob. 20.17PCh. 20 - Integrating Case 201 Change to dollar-value LIFO ...Ch. 20 - Prob. 20.2BYPCh. 20 - Prob. 20.3BYPCh. 20 - Analysis Case 204 Change in inventory methods;...Ch. 20 - Prob. 20.5BYPCh. 20 - Prob. 20.6BYPCh. 20 - Analysis Case 208 Various changes LO201 through...Ch. 20 - Analysis Case 209 Various changes LO201 through...Ch. 20 - Prob. 20.10BYPCh. 20 - Prob. 20.11BYPCh. 20 - Prob. 20.12BYPCh. 20 - Prob. 1CCTC
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