FINANCIAL ACCT(HARDBK)+MYACCTGLAB>ICB<
W20 Edition
ISBN: 9780136615583
Author: REIMERS
Publisher: PEARSON C
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 4SEA
To determine
Identify the warranty expense amount related to these sales will affect Company K’s income statement in the year of the sales, and State the amount of warranty expense related to these sales will Company K have in the two years after the sales.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Calla Corp. sells equipment that comes with a two-year unlimited warranty on parts and labour for repairs. All sales are cash sales. The warranty is intended to assure customers that the appliances will operate as advertised. The warranty is expected to cost 2% of sales in the first year and 4% of sales in the second year, for a total of 6%. The provision for warranty has a credit balance of $189,000 at the beginning of 20X5. The following events and decisions relate to the warranty:
20X5
Sales revenue of $4,650,000 was generated from products covered by the warranty. Both the sale and the warranty provision must be recorded.
20X5
Warranty work consumed parts inventory with a cost of $8,300, and labour of $33,000. Labour costs were paid in cash.
20X6
Sales revenue from products covered by the warranty were $6,650,000. Both the sale and the
warranty provision must be recorded.
20X6
Warranty work…
Haeir 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 550,000
Consumer Corp. sells dishwashers and washing machines that come with a two-year unlimited warranty on parts and labour for repairs. The warranty is intended to assure customers that the appliances will operate as advertised. The warranty is expected to cost 4% of sales in the first year and 6% of sales in the second year, for a total of 10%. The provision for warranty has a credit balance of $161,000 at the beginning of 20X5. The following events and decisions relate to the warranty:
20X5
Sales revenue of $4,750,000 was generated from products covered by the warranty. Both the sale and the warranty provision must be recorded.
20X5
Warranty work consumed parts inventory with a cost of $8,500, and labour of $35,000.
20X6
Sales revenue from products covered by the warranty were $6,750,000. Both the sale and the warranty provision must be recorded.
20X6
Sales revenue of $6,750,000 was generated from products covered by the warranty. Warranty work…
Chapter 7 Solutions
FINANCIAL ACCT(HARDBK)+MYACCTGLAB>ICB<
Ch. 7 - Prob. 1YTCh. 7 - Prob. 2YTCh. 7 - Prob. 3YTCh. 7 - If a 1,000 bond is selling for 95.5, how much cash...Ch. 7 - Prob. 5YTCh. 7 - Prob. 6YTCh. 7 - Prob. 7YTCh. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - What is a mortgage?
Ch. 7 - Prob. 4QCh. 7 - Prob. 5QCh. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10QCh. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Prob. 13QCh. 7 - Prob. 1MCQCh. 7 - All of the following are current liabilities...Ch. 7 - Prob. 3MCQCh. 7 - Prob. 4MCQCh. 7 - Prob. 5MCQCh. 7 - Prob. 6MCQCh. 7 - Prob. 7MCQCh. 7 - Prob. 8MCQCh. 7 - A 1,000 bond with a stated rate of 8% is issued...Ch. 7 - Prob. 10MCQCh. 7 - Prob. 1SEACh. 7 - Prob. 2SEACh. 7 - Prob. 3SEACh. 7 - Prob. 4SEACh. 7 - Account for mortgages. (LO 3). Nunez Company has...Ch. 7 - Prob. 6SEACh. 7 - Account for bonds. (LO 4). If a 1,000 bound is...Ch. 7 - Prob. 8SEACh. 7 - Prob. 9SEACh. 7 - Prob. 10SEACh. 7 - Prob. 11SEACh. 7 - Prob. 12SEBCh. 7 - Prob. 13SEBCh. 7 - Prob. 14SEBCh. 7 - Prob. 15SEBCh. 7 - Account for mortgages. (LO 3). Curtain Company...Ch. 7 - Prob. 17SEBCh. 7 - Prob. 18SEBCh. 7 - Prob. 19SEBCh. 7 - Prob. 20SEBCh. 7 - Prob. 21SEBCh. 7 - Prob. 22SEBCh. 7 - Prob. 23EACh. 7 - Prob. 24EACh. 7 - Prob. 25EACh. 7 - Prob. 26EACh. 7 - Account for long-term liabilities. (LO 3, 5)....Ch. 7 - Prob. 28EACh. 7 - Prob. 29EACh. 7 - Prob. 30EACh. 7 - Prob. 31EACh. 7 - Prob. 32EACh. 7 - Prob. 33EACh. 7 - Prob. 34EACh. 7 - Prob. 35EACh. 7 - Prob. 36EACh. 7 - Prob. 37EACh. 7 - Prob. 38EACh. 7 - Prob. 39EACh. 7 - Prob. 40EACh. 7 - Prob. 41EACh. 7 - Prob. 42EBCh. 7 - Prob. 43EBCh. 7 - Prob. 44EBCh. 7 - Prob. 45EBCh. 7 - Prob. 46EBCh. 7 - Prob. 47EBCh. 7 - Prob. 48EBCh. 7 - Account for long-term liabilities. (LO 3, 5). On...Ch. 7 - Prob. 50EBCh. 7 - Prob. 51EBCh. 7 - Prob. 52EBCh. 7 - Prob. 53EBCh. 7 - Prob. 54EBCh. 7 - Prob. 55EBCh. 7 - Prob. 56EBCh. 7 - Prob. 57EBCh. 7 - Prob. 58EBCh. 7 - Prepare an amortization schedule for a bond issued...Ch. 7 - Prob. 60EBCh. 7 - Account for current liabilities. (LO 1, 5). On...Ch. 7 - Prob. 62PACh. 7 - Prob. 63PACh. 7 - Prob. 64PACh. 7 - Prob. 65PACh. 7 - Prob. 66PACh. 7 - Prob. 67PBCh. 7 - Prob. 68PBCh. 7 - Prob. 69PBCh. 7 - Prob. 70PBCh. 7 - Prob. 71PBCh. 7 - Prob. 72PBCh. 7 - Prob. 1FSACh. 7 - Prob. 2FSACh. 7 - Prob. 3FSACh. 7 - Prob. 1IECh. 7 - Prob. 2IECh. 7 - Do owners or creditors have more claims on the...Ch. 7 - Prob. 4IE
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Homeland Plus specializes in home goods and accessories. In order for the company to expand its business, the company takes out a long-term loan in the amount of $650,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 8.5%. Each year on December 31, the company pays down the principal balance by $80,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year. A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest. B. Compute the interest accrued on December 31 of the first year. C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.arrow_forwardMcMasters Inc. specializes in BBQ accessories. In order for the company to expand its business, they take out a long-term loan in the amount of $800,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 9%. Each year on December 31, the company pays down the principal balance by $50,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year. A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest. B. Compute the interest accrued on December 31 of the first year. C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.arrow_forwardLime Co. incurs a $4,000 note with equal principal installment payments due for the next eight years. What is the amount of the current portion of the noncurrent note payable due in the second year? A. $800 B. $1,000 C. $500 D. nothing, since this is a noncurrent note payablearrow_forward
- White Hat Digital, Inc. starts the year with a credit balance of $3,500 in its Estimated Warranty Payable account. During the year, there were $224,000 in sales and $4,800 in warranty repair payments. White Hat Digital estimates warranty expense at 2% of sales. At the end of the year, what is the balance in the Estimated Warranty Payable account?arrow_forwardBlue Jay, Inc., manufactures and sells computer monitors with a three-year warranty.Warranty costs are expected to average 7% of sales during the warranty period. The followingtable shows the sales and actual warranty payments during the first two years of operations:Year Sales Warranty Payments2018 $650,000 $ 5,8502019 850,000 42,500Based on these facts, what amount of warranty liability should Blue Jay, Inc., report on itsbalance sheet at December 31, 2019?a. $48,350b. $56,650c. $105,000d. $42,500arrow_forwardA company manufactures electronic equipment and offers a one-year warranty with each unit sold. For the year, the company sold 25,000 units. Based on historical averages, management expects 4% of the units sold will need warranty work. The estimated warranty cost per unit is $100.Required:Estimate (a) the number of units that will need warranty work and (b) future warranty costs. (c) Prepare the year-end adjusting entry for estimated warranty costs, assuming none of the units sold in the current year required warranty work. (d) Alternatively, prepare the year-end adjusting entry for estimated warranty costs, assuming that 25% of the estimated warranty work has already occurred by the end of the current year. How would your answers change if management’s estimate of warranty work increases to 5% of units sold and the estimated warranty cost per unit increases to $120?arrow_forward
- Munster sells a product with a four-year warranty. Warranty costs are estimated as a percentage of sales as follows: Year of sale 1% Year after sale 1% Two years after sale 1% Three years after sale 4% Additional data: Year Warranty Sales Expenditures 2019 $50,000 $600 2020 60,000 800 2021 40,000 900 2022 70,000 2,500 If this is an assurance-type warranty and the company uses the modified cash method, what would be warranty expense for 2021? If this is an assurance-type warranty and and the company uses the GAAP approach of accruing warranty expense (and the related liability) in the year of the sale, what would be warranty expense for 2021? If the company considers that 7% of the selling price of the product represents payment for an implied service-type warranty, what amount of unearned warranty revenue would be disclosed on the balance sheet on December 31, 2022?arrow_forwardOn September 1, 2021, Middleton Corp. lends cash and accepts a $5,000 note receivable that offers 10% interest and is due in six months. How much interest revenue will Middleton Corp. report during 2021?arrow_forwardPesto Company started its business in selling printers with three-year warranty. It estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 3% will be repaired during the first year of warranty, 5% will be repaired during the second year of warranty and 7% will be repaired in the third year. The product warranty provides service other than agreed upon specification. In 2021 and 2022, the company was able to sell 10,000 units and 12,500 units, respectively at a total price of P7,000 per unit. The company also incurred actual repair costs of P3,500,000 and P9,500,000 in 2021 and 2022, respectively. The selling price of the warranty is P2,000 per unit. The printer is selling at P5,000 if without the warranty. Pesto Company should report unearned warranty income at the end of December 31, 2022 of? P10,625,000 P29,333,333 P21,666,667 P16,000,000arrow_forward
- Pesto Company started its business in selling printers with three-year warranty. It estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 3% will be repaired during the first year of warranty, 5% will be repaired during the second year of warranty and 7% will be repaired in the third year. The product warranty provides service other than agreed upon specification. In 2021 and 2022, the company was able to sell 10,000 units and 12,500 units, respectively at a total price of P7,000 per unit. The company also incurred actual repair costs of P3,500,000 and P9,500,000 in 2021 and 2022, respectively. The selling price of the warranty is P2,000 per unit. The printer is selling at P5,000 if without the warranty. Pesto Company should report unearned warranty income at the end of December 31, 2022 of? Group of answer choices P29,333,333 P21,666,667 P16,000,000 P10,625,000arrow_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_forwardZetix borrowed $20,000 on a one-year, 10 percent note payable from the local bank on March 1. Interest was paid quarterly, and the note was repaid one year from the time the money was borrowed. RequirementsCalculate the amount of cash payments Zetix was required to make in each of the two calendar years that were affected by the note payable assuming accounting period ends on Dec. 31 each year. ii. Glen Pool Club, Inc., has a $300,000 mortgage liability. The mortgage is payable in monthly installments of $3000, which include interest computed at an annual rate of 12 percent.RequirementsPrepare a partial amortization table showing (1) the original balance of this loan, and (2) the allocation of the first two monthly payments between interest expense and the reduction in the mortgage’s unpaid balance. (Round to the nearest dollar.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
7.2 Ch 7: Notes Payable and Interest, Revenue recognition explained; Author: Accounting Prof - making it easy, The finance storyteller;https://www.youtube.com/watch?v=wMC3wCdPnRg;License: Standard YouTube License, CC-BY