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INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
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Textbook Question
Chapter 20, Problem 20.7BE
Warranty expense
• LO20–4
In 2017, Quapau Products introduced a new line of hot water heaters that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 5% of sales revenue. First-year sales of the heaters were $300,000. An evaluation of the company’s claims experience in late 2018 indicated that actual claims were less than expected—4% of sales rather than 5%. Assuming sales of the heaters in 2018 were $350,000 and warranty expenditures in 2018 totaled $12,000, what is the 2018 warranty expense?
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Students have asked these similar questions
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
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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
Problem 1
In 2020, Plumpton 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
Second year of warranty
3%
9%
Sales and actual warranty repairs are
as follows:
Sales
Actual warranty repairs
2020
P5.000.000
100.000
2021
P7.000.000
250.000
1. How much is the warranty expense for 2020?
2. How much is the estimated warranty liability for 2021 ?
Chapter 20 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
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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- 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?arrow_forwardChapter 4/Question 3: Mobiles Co sells goods with a one year warranty under which customers are covered for any defect that becomes apparent within a year of purchase. In calendar year 20X4, Mobiles Co sold 100,000 units. The company expects warranty claims for 5% of units sold. Half of these claims will be for a major defect, with an average claim value of $50. The other half of these claims will be for a minor defect, with an average claim value of $10. What amount should Mobiles Co include as a provision in the statement of financial position for the year ended 31 December 20X4?arrow_forwardP-5*** SAN Company began selling new line of product that carries a one year warranty against defects. Based upon experience the estimated warranty costs related to peso sales is 5%. The selling price per unit of product is P1500. The number of units sold in 2011 and 2012 are 12,000 units and 20,000 units, respectively. Actual warranty expenditures for the year 2011 amounted to P800,000 and in 2012, the warranty expenditures amountedto P1,200,000. 8. At December 31,2011 and December 31,2012 financial statements, how much shall be reported as Accrual approach Expense approach Estimated warranty liability,2011 Warranty expense,2011 Estimated warranty liability.2012arrow_forward
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