Question

Inline Incorporated manufactures skates and equipment for in-line skating. The company offers a one-year warranty on...

Inline Incorporated manufactures skates and equipment for in-line skating. The company offers a one-year warranty on all products. During 2019, the company recorded net sales of $4,127.8 million. Historically, about 1.5% of all sales revenue for the year are the cost of repairing and or replacing goods under warranty. Assume that at the start of the year Inline’s balance sheet included an accrued warranty liability of $15.4 million and at the end of the year, the accrued warranty liability balance was $11.5 million.

a. How should Inline account for warranty claims?

b. Calculate Inline’s warranty expense for 2019.

c. How much did Inline pay during the year to repair and or replace goods under warranty?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Widget company sells an industrial line of products that are all subject to a 3-year warranty....
Widget company sells an industrial line of products that are all subject to a 3-year warranty. Prior experience has resulted in an average warranty cost of 3% of revenue for its products. The company had an accrued warranty liability of $500,000 at December 2018. During January of 2019, product sales were $6 million, and the actual warranty costs incurred were $145,000. Prepare journal entries to record product sales (assume all credit sales), the warranty accrual, and actual warranty costs incurred...
1. Widget company sells an industrial line of products that are all subject to a 3-year...
1. Widget company sells an industrial line of products that are all subject to a 3-year warranty. Prior experience has resulted in an average warranty cost of 3% of revenue for its products. The company had an accrued warranty liability of $500,000 at December 2018. During January of 2019, product sales were $6 million, and the actual warranty costs incurred were $145,000. a. Prepare journal entries to record product sales (assume all credit sales), the warranty accrual, and actual warranty...
Alpha Company sells widgets for $20 each. The widget has a one year warranty. Alpha estimates...
Alpha Company sells widgets for $20 each. The widget has a one year warranty. Alpha estimates that 6% of the widgets will require repair during the warranty period. The estimated average repair cost is $4.30 per widget. On July 31, the Estimated Warranty Liability account had a normal balance of $15,000. During August, sales were $70,000. During August, 550 widgets were repaired under the warranty agreement with an actual cost of $4.50 each. Use this information to determine: 1. The...
During its first year of operations ABC Limited had sales of $325,000. The company offers a...
During its first year of operations ABC Limited had sales of $325,000. The company offers a 2- year limited warranty on all sales and expects that warranty costs for the first year will average 1% of sales with an additional 2% in the second year. During the current year the company spent $2,200 on warranty repairs. Required: 1. Prepare all journal entries related to the warranty for the current year. 2. How will the warranty liability be reported on the...
Merritt Equipment Company sells computers for $1,300 each and also gives each customer a 2-year warranty...
Merritt Equipment Company sells computers for $1,300 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 950 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $40 for parts and $60 for labor. (Assume sales all occur at December 31, 2017.) In 2018, Merritt incurred actual warranty costs relative to 2017 computer sales of $12,400 for...
During 2019 Canada Computer Company sold computers for $100,000 which includes a 2-year warranty. Warranties sold...
During 2019 Canada Computer Company sold computers for $100,000 which includes a 2-year warranty. Warranties sold separately for $70,000 that requires the company to perform periodic services and to replace defective parts. In 2020, Canada Computer Company incurred actual warranty costs relative to 2019 computer sales of $5,000 for parts and $12,000 for labor.                                                                                              Instructions (a) Using the revenue warranty approach, prepare the entries to reflect the above transactions for 2019 and 2020, assuming Canada co. earn any unearned warranties...
Miley Equipment Company sells computers for $1,500 each and also gives each customer a 2-year warranty...
Miley Equipment Company sells computers for $1,500 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2019, the company sold 900 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $100 per computer sold. In 2020, Miley incurred actual warranty costs relative to 2019 computer sales of $30,000. Prepare the entries to reflect the above warranty transactions (accrual method) for...
Bombardier Inc. specializes in manufacturing transportation products (aircraft, railway equipment, snowmobiles, and watercraft). The company offers...
Bombardier Inc. specializes in manufacturing transportation products (aircraft, railway equipment, snowmobiles, and watercraft). The company offers warranties on all of its products. Note 2 to Bombardier’s financial statements for fiscal year 2015 stated the following: Product warranties typically range from one to five years, except for aircraft and bogie structural warranties that extend up to 20 years. Selected information from Bombardier’s annual reports follows (amounts in millions of U.S. dollars): 2015 2014 2013 Revenues 18,172 20,111 18,151 Provision for product...
Problem 13-7 Cheyenne Company sells a machine for $6,840 with a 12-month warranty agreement that requires...
Problem 13-7 Cheyenne Company sells a machine for $6,840 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the company sells 620 machines in 2017 (warranty expense is incurred half in 2017 and half in 2018). As a result of product testing, the company estimates that the warranty cost is $384 per machine ($170 parts...
Bombardier Inc. specializes in manufacturing transportation products (aircraft, railway equipment, snowmobiles, and watercraft). The company offers...
Bombardier Inc. specializes in manufacturing transportation products (aircraft, railway equipment, snowmobiles, and watercraft). The company offers warranties on all of its products. Note 2 to Bombardier’s financial statements for fiscal year 2015 stated the following: Product warranties typically range from one to five years, except for aircraft and bogie structural warranties that extend up to 20 years. Selected information from Bombardier’s annual reports follows (amounts in millions of U.S. dollars):    2015 2014 2013   Revenues 17,093 18,672 18,217   Provision for...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT