Question

PLease By details !

A) On December 1, Cypress Grove Company introduces a new product that includes a one-year warranty on parts. In December, 500 units are sold. Management believes that 5% of the units will be defective and that the average warranty costs will be $60 per unit. Prepare the adjusting entry at December 31 to accrue the estimated warranty cost.






B) Prepare the necessary journal entries for the following transactions:
(a)​On September 1, Draper Company borrowed $180,000 from Dixion County Bank on a 6-month, 8% note.
(b)​On December 31, Draper Company accrued interest (assume adjusting entries are only made at the end of the year).






C) Back Cove Yacht Company billed its customers a total of $1,575,000 for the month of November. The total includes a 5% state sales tax.
Instructions
(a)​Determine the proper amount of revenue to report for the month.
(b)​Prepare the general journal entry to record the revenue and related liabilities for the month.

Answer 1

Answer:

A)

Date	General Ledger	Debit	Credit
Dec 31	Warranty Expense	1,500
	Warranty Liability		1,500
	[(500 × 5%) × $60]

B)

Q. No	General Ledger	Debit	Credit
a	Cash	180,000
	Notes Payable		180,000
b	Interest Expense	4,800
	Interest Payable ($180,000 ×.08 × 4÷12)		4,800

C)

a: $1,575,000 ÷ 1.05 = $1,500,000 is the total sales revenue.

b:  $1,500,000 × .05 = $75,000 is the state sales tax liability

General Ledger	Debit	Credit
Accounts Receivable	1,575,000
Sales Revenue		1,500,000
Sales Taxes Payable		75,000