E13-10 (Warranties) Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty. Maintenance on each machine during the warranty period averages $330.
a.) Prepare entries to record the sale of the machines and the related warranty costs, assuming that the accrual method is used. Actual warranty costs incurred in 2008 were $17,000.
b.) Prepare 2008 entries for Crow assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $150,000 relates to sales warranty contracts. Crow estimates the total cost of servicing the warranties will be $120,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs.
Click here for the solution: Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty
Showing posts with label warranty. Show all posts
Showing posts with label warranty. Show all posts
Wednesday, November 11, 2015
Monday, October 26, 2015
(Exam 061691) 1. A warranty is an example of a/an _______ liability
EXAM 061691
MULTIPLE CHOICE
1. A warranty is an example of a/an _______ liability.
2. Cash equivalents are
3. Which of the following would indicate poor internal control over accounts receivable?
4. Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded to the nearest cent)
5. Taylor Company has given you the following information from its aging of accounts receivable. The current amount in the allowance for doubtful accounts is a $958 credit.
Current $24,400 2% uncollectible
31–60 days 7,350 8% uncollectible
61–90 days 3,380 15% uncollectible
91 and up 1,220 30% uncollectible
Using this information, what is the amount of the journal entry to record the allowance for doubtful accounts?
6. A company purchased furniture on January 1, 2012. Its cost was $15,600, and it had a residual value of $1,600. Its useful life is determined to be three years. Using double-declining balance depreciation, the depreciation for 2012 to the nearest dollar will be
7. Brandon Company completed an aging of its accounts receivable and came up with an estimated amount of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectable accounts, how much will the credit be to the allowance for doubtful accounts if Brandon uses the estimate of aging receivables as its method of estimating uncollectable accounts?
8. Use the _______ principle to estimate warranty liabilities.
9. By not accruing warranty expense,
10. Nick Company has cash of $33,000; net accounts receivable of $41,000; short-term investments of $15,000; and inventory of $25,000. It also has $30,000 in current liabilities and $50,000 in long-term liabilities. The quick ratio for Nick Company is
11. Tammy Industries inadvertently debited a $5,000 betterment as an ordinary expense. Which of the following will occur as a result of this mistake?
12. Using a 365-day year, the maturity value of a 180-day note for $2,700 at 9% annual interest is (rounded to the nearest cent)
13. Which marketable securities are reported at cost on the balance sheet date?
14. Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. The amount at which item C should be recorded (rounded to the nearest dollar) is
15. If a $6,000, 10%, 10-year bond was issued at 104 on October 1, 2011, how much interest will accrue on December 31 if interest payments are made annually?
16. Casey Company's bank statement shows a bank balance of $43,267. The statement shows a bank service charge of $50. Casey's book balance shows outstanding checks of $5,288 and deposits in transit of $9,325. The bank-side reconciliation would show cash of
17. Mackey Company has a five-year mortgage for $100,000. In the first year of the mortgage, Mackey will report this liability as a
18. Which of the following is not a benefit to extending credit to customers?
19. Amanda Industries had total assets of $600,000; total liabilities of $175,000; and total stockholders' equity of $425,000. Amanda Industries' debt ratio is
20. Jewell Company has current assets of $56,000; long-term assets of $135,000; current liabilities of $44,000; and long-term liabilities of $90,000. Jewell Company's debt ratio is
Click here for the solution: (Exam 061691) 1. A warranty is an example of a/an _______ liability
MULTIPLE CHOICE
1. A warranty is an example of a/an _______ liability.
2. Cash equivalents are
3. Which of the following would indicate poor internal control over accounts receivable?
4. Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded to the nearest cent)
5. Taylor Company has given you the following information from its aging of accounts receivable. The current amount in the allowance for doubtful accounts is a $958 credit.
Current $24,400 2% uncollectible
31–60 days 7,350 8% uncollectible
61–90 days 3,380 15% uncollectible
91 and up 1,220 30% uncollectible
Using this information, what is the amount of the journal entry to record the allowance for doubtful accounts?
6. A company purchased furniture on January 1, 2012. Its cost was $15,600, and it had a residual value of $1,600. Its useful life is determined to be three years. Using double-declining balance depreciation, the depreciation for 2012 to the nearest dollar will be
7. Brandon Company completed an aging of its accounts receivable and came up with an estimated amount of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectable accounts, how much will the credit be to the allowance for doubtful accounts if Brandon uses the estimate of aging receivables as its method of estimating uncollectable accounts?
8. Use the _______ principle to estimate warranty liabilities.
9. By not accruing warranty expense,
10. Nick Company has cash of $33,000; net accounts receivable of $41,000; short-term investments of $15,000; and inventory of $25,000. It also has $30,000 in current liabilities and $50,000 in long-term liabilities. The quick ratio for Nick Company is
11. Tammy Industries inadvertently debited a $5,000 betterment as an ordinary expense. Which of the following will occur as a result of this mistake?
12. Using a 365-day year, the maturity value of a 180-day note for $2,700 at 9% annual interest is (rounded to the nearest cent)
13. Which marketable securities are reported at cost on the balance sheet date?
14. Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. The amount at which item C should be recorded (rounded to the nearest dollar) is
15. If a $6,000, 10%, 10-year bond was issued at 104 on October 1, 2011, how much interest will accrue on December 31 if interest payments are made annually?
16. Casey Company's bank statement shows a bank balance of $43,267. The statement shows a bank service charge of $50. Casey's book balance shows outstanding checks of $5,288 and deposits in transit of $9,325. The bank-side reconciliation would show cash of
17. Mackey Company has a five-year mortgage for $100,000. In the first year of the mortgage, Mackey will report this liability as a
18. Which of the following is not a benefit to extending credit to customers?
19. Amanda Industries had total assets of $600,000; total liabilities of $175,000; and total stockholders' equity of $425,000. Amanda Industries' debt ratio is
20. Jewell Company has current assets of $56,000; long-term assets of $135,000; current liabilities of $44,000; and long-term liabilities of $90,000. Jewell Company's debt ratio is
Click here for the solution: (Exam 061691) 1. A warranty is an example of a/an _______ liability
Wednesday, October 14, 2015
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2010 that carry a one-year warranty against manufacturer's defects
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2010 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 2010 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:
Accrued liability and expense
Warranty expense (2% x $2,500,000) 50,000
Estimated warranty liability 50,000
Actual expenditures (summary entry)
Estimated warranty liability 23,000
Cash, wages payable, parts and supplies, etc. 23,000
In late 2011, 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 2011 were $3,600,000 and warranty expenditures in 2011 totaled $88,000, prepare any journal entries related to the warranty.
2. Assuming sales of the sprinklers were discontinued after 2010, prepare any journal entry(s) in 2011 related to the warranty.
Click here for the solution: Woodmier Lawn Products introduced a new line of commercial sprinklers in 2010 that carry a one-year warranty against manufacturer's defects
Accrued liability and expense
Warranty expense (2% x $2,500,000) 50,000
Estimated warranty liability 50,000
Actual expenditures (summary entry)
Estimated warranty liability 23,000
Cash, wages payable, parts and supplies, etc. 23,000
In late 2011, 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 2011 were $3,600,000 and warranty expenditures in 2011 totaled $88,000, prepare any journal entries related to the warranty.
2. Assuming sales of the sprinklers were discontinued after 2010, prepare any journal entry(s) in 2011 related to the warranty.
Click here for the solution: Woodmier Lawn Products introduced a new line of commercial sprinklers in 2010 that carry a one-year warranty against manufacturer's defects
Tuesday, August 18, 2015
How does the expense warranty approach differ from the sales warranty approach?
How does the expense warranty approach differ from the sales warranty approach?
Click here for the solution: How does the expense warranty approach differ from the sales warranty approach?
Click here for the solution: How does the expense warranty approach differ from the sales warranty approach?
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