Requirement – 1
Performance obligation:
Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.
Warranty:
Warranty is the practice of normal business for quality assurance. It is obligation of the seller to make repairs or replace the product if there is any defect or unsatisfactory in future.
Deferred revenues:
Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
- Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
To determine: The number of performance obligations included in the Pro tab package.
Requirement – 2
The amount of contract price allocated to each performance obligation.
Requirement – 3
To prepare: The
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INTERMEDIATE ACCOUNTING <CUSTOM LL>
- Question 13 Masterpiece Sales Company offers warranties on all their electronic goods. Warranty expense is estimated at 3% of sales revenue. In 2019, the company had $603,000 in sales. In the same year, Masterpiece Sales replaced defective goods with goods that had a cost of $18,500. Which of the following is the entry needed to record the replacement of the defective goods? Warranty Expense Estimated Warranty Payable 18,090 18,090 O Estimated Warranty Payable Merchandise Inventory 18,500 18,500 Estimated Warranty Payable 16,500 Merchandise lInventory 16,500 18,090 O Warranty Expense Merchandise Inventory 18,090 «>arrow_forwardEXERCISE 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_forwardQUESTION 3 Staples extends a lifetime replacement warranty on all its financial calculators. Using past experience, Staples estimates that 1% of all units sold will be returned and require replacement at their average cost. On January 1, 2020, the balance in Staples' Estimated Warranty Liability account was $2,020. On January 2nd 2020 Staples purchased 6,000 calculators for $240,000 to have available in inventory. Staples sells its calculators for $50/unit, and during 2020, sales totaled $275,000. The actual number of units returned and replaced was 50. 1. Prepare the entry to estimate warranty liabilities based on the calculators sold for 2020. Assume the adjustment is made on December 31". 2. Record the replacement of the calculators returned in 2020 (use a date of December 31) 3. Calculate the balance in the Estimated Warranty Liability account at December 31, 2020.arrow_forward
- Page INSTRUCTIONS: esc 2 A 7 4x 4 1 + | 电器 5 2 0 3. Hampton Manufacturing began operations in January 2024. Hampton sells computers that carry a two-year manufacturer's warranty against defects in workmanship. Hampton's management projects that 2% of the computers will require repair during the first year of the warranty, while approximately 6% will require repair during the second year of the warranty. The computers sell for $1,000 each. The average cost to repair a computer is $300. The company sells 100% of the computers to retail customers who must pay a 7% sales tax. Sales and warranty information for 2024 and 2025 are as follows: I 9 LO 2024: Sold 400 computers on account; incurred warranty expenditures of $2,000. 2025: Sold 800 computers on account; incurred warranty expenditures of $15,000. 3 a. Prepare journal entries that summarize the sales and all aspects of the warranty for 2024. b. Prepare journal entries that summarize the sales and all aspects of the warranty for 2025.…arrow_forwardLO6-4,LO6-5 E 6-5 Performance obligations LO6–2, On March 1, 2024, Gold Examiner receives $147,000 from a local bank and promises to deliver 100 units of certified l-oz. gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink's, a third-party carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is $1,440 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $60 per unit. Brink's picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April 1. Required: 1. How many performance obligations are in this contract? 2. Prepare the journal entry Gold Examiner would record on March 1. 3. Prepare the journal entry Gold Examiner would record on March 30. 4. Prepare the journal entry Gold Examiner would record on April…arrow_forwardProblem 3-1 (IAA) a repair warranty The sale price for each set is P15,000. The average repair cost per set is P800. Research has shown that 20% of all sets sold are repaired in the first year and 40% in the second year. 2020 2021 300 500 150,000 Number of sets sold 40,000 Total payments'for warranty repairsarrow_forward
- Question 10 A Plus Appliances sells dishwashers with a four-year warranty. In 2019, sales revenue for dishwashers is $94,000. The company estimates warranty expense at 6.5% of revenues. What is the total estimated warranty payable of A Plus Appliances as of December 31,2019? A Plus Appliances began operating in 2019. (Round your final answer to the nearest dollar.) O $1548 O $4230 O $6110 O $3318 11:21 AN 4/22/202arrow_forwardExercise 5-20 (Algo) Deferred annuities; solving for annuity amount [LO5-8, 5-9] On April 1, 2024, Antonio purchased appliances from the Acme Appliance Company for $500. In order to increase sales, Acme allows customers to pay in installments and will defer any payments for six months. Antonio will make 18 equal monthly payments, beginning October 1, 2024. The annual interest rate implicit in this agreement is 24%. Required: Calculate the monthly payment necessary for Antonio to pay for his purchases. Note: Use tables, Excel, or a financial calculator. Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Monthly paymentarrow_forwardModule4_Lease.pdf x 16 / 19 100% Problem 14-19 (IFRS) Liza Company is a car dealer. On January 1, 2020, the entity entered into a finance lease with a customer under which the customer would pay P200,000 on January 1 each year for 5 years, commencing in 2020. The cost of the car is P600,000 and the cash selling price was P750,000. The entity paid legal fees of P20,000 to a law firm in connection with the arrangement of the lease. What amount of gross profit on sale should be recognized for the year ended December 31, 2020? a. 150,000 b. 130,000 20,000 d. c.arrow_forward
- 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 >arrow_forward22 23 24 25 26 27 2. Prepare the journal entry made by Best Buy assuming that you use the coupon to purchase the wall 28 mount. 29 30 Enter your answer below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. 31 32 Entry when coupon is used to purchase wall mount: 33 Account Debit Credit 34 35 36 37 38 39 40 41 42 43 3. Prepare the journal entry (if needed) made by Best Buy assuming that you allow the coupon to lapse. 44 45 Enter your answer below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. 46 47 Entry when the coupon lapses unused: 48 Account 49 Debit Credit 50 51 52 53 54 222arrow_forwardQuestion 12 On August 1, 2020, Alba Trading sold a machine for $13,000 cash with a two-year parts warranty. On March 1, 2021, the machine requires on-site repairs which cost $200 of the repair parts inventory. Alba estimates warranty costs to be 4% of dollar sales. In 2020, Alba reports warranty expense of: O A. $ 720. O B. $ 320. O C. $ 520. O D. $ 200.arrow_forward