Question

Widget company sells an industrial line of products that are all subject to a 3-year warranty....

  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.
    1. Prepare journal entries to record product sales (assume all credit sales), the warranty accrual, and actual warranty costs incurred in January of 2019.
  1. Show a T-account with for the transactions in the Estimated Warranty Liability account for January, with the correct ending balance for this liability.
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
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...
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...
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...
Rotary Tools sells power tools and backs each product it sells with a one-year warranty against...
Rotary Tools sells power tools and backs each product it sells with a one-year warranty against defects. Based on previous experience, the company expects warranty costs to be approximately 4% of sales. By the end of the first year, sales are $800,000. Actual warranty expenses incurred so far are $12,000. 1. Does this situation represent a contingent liability? Yes No 2. Record warranty expense and warranty liability for the year based on 4% of sales 3. Record the actual warranty...
A company sells its product subject to a warranty that covers the cost of parts for...
A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale. Warranty costs are estimated to be 5% of sales. During the month of July, the company preformed warranty work and used $11,000 of parts to preform the warranty work. Sales for July were $450,000 1. Record the warranty expense for the month of July. 2. Record the costs of the warranty completed in July....
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...
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...
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...
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2020 that carry a one-year...
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2020 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 2020 were $2,500,000. Accordingly, the following entries relating to the contingency for warranty costs were recorded...
A company sells its product subject to a warranty that covers the cost of parts and...
A company sells its product subject to a warranty that covers the cost of parts and labour for repairs during the six months after sale. Warranty costs are estimated to be 4.5% of sales for parts, and 1.5% of sales for labour. During the month of June, the company performed warranty work and used $8,000 worth of parts and paid $4,000 in wages for labour to do the warranty work. Sales for June amounted to $450,000. (1) What account should...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT