Question

Hits Co. sold a copier (that costs $3,500) for $7,000 cash with a two-year parts warranty...

Hits Co. sold a copier (that costs $3,500) for $7,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hits expect warranty costs to be 4% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $120 for materials taken from the repair parts inventory. These are the only repairs required in Year 2 for this copier. 1. How much warranty expense does the company report for this copier in Year 1? 2. How much is the estimated warranty liability for this copier as of December 31 of Year 1? 3. How much is the estimated warranty liability for this copier as of December 31 of Year 2? 4. Prepare journal entries to record (a) the copier’s sale; (b) the adjustment to recognize the warranty expense on December 31 of Year 1; and (c) the repairs that occur on January 5 of Year 2.

Homework Answers

Answer #1

Answer-1:

Warranty expense for yer 1= $7,000 × 4% = $280

Answer-2:

Estimated warranty liability as of December 31 of Year 1 = $280

Explanation:

As there is no repair in the Year 1, the estimated warranty liability will be same as warranty expenses incurred.

Answer-3:

Estimated warranty liability as of December 31 of Year 2 = Beginning balance - repair cost = $280 - 120 = $160

Answer-4:

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Hitzu Co. sold a copier (that costs $4,500) for $9,000 cash with a two-year parts warranty...
Hitzu Co. sold a copier (that costs $4,500) for $9,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu expects warranty costs to be 3% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $124 for materials taken from the repair parts inventory. These are the only repairs...
Hitzu Co. sold a copier (that costs $6,500) for $13,000 cash with a two-year parts warranty...
Hitzu Co. sold a copier (that costs $6,500) for $13,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu expects warranty costs to be 3% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $136 for materials taken from the repair parts inventory. These are the only repairs...
John Co. sold a copier (that costs $5,500) for $11,000 cash with a two-year parts warranty...
John Co. sold a copier (that costs $5,500) for $11,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. John expects warranty costs to be 3% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $122 for materials taken from the repair parts inventory. These are the only repairs...
Hitzu Co. sold a copier costing $4,800 with a two-year parts warranty to a customer on...
Hitzu Co. sold a copier costing $4,800 with a two-year parts warranty to a customer on August 16, 2017, for $6,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2018, the copier requires on-site repairs that are completed the same day. The repairs cost $209 for materials taken from the repair parts inventory. These are the only repairs required in 2018 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 4% of dollar...
[The following information applies to the questions displayed below.] Hitzu Co. sold a copier (that costs...
[The following information applies to the questions displayed below.] Hitzu Co. sold a copier (that costs $5,500) for $11,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu expects warranty costs to be 4% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $133 for materials taken from...
ABC Company sold 250 machines with a one year warranty contract. It is estimated that 6%...
ABC Company sold 250 machines with a one year warranty contract. It is estimated that 6% of the machines will be defective with an average repair cost of $20 per machine. During the year, the company honored warranty contracts on 8 machines. 1) The number of estimated defective units is: * 20 units 25 units 30 units None of the above 2) The estimated warranty expense of the year is: * $250 $300 None of the above $160 3) The...
ABC Company sold 250 machines with a one year warranty contract. It is estimated that 6%...
ABC Company sold 250 machines with a one year warranty contract. It is estimated that 6% of the machines will be defective with an average repair cost of $20 per machine. During the year, the company honored warranty contracts on 8 machines. Use the above information to compute the below: 1) The number of estimated defective units is: * 20 units 25 units 30 units None of the above 2) The estimated warranty expense of the year is: * $250...
ABC Company sold 250 machines with a one year warranty contract. It is estimated that 6%...
ABC Company sold 250 machines with a one year warranty contract. It is estimated that 6% of the machines will be defective with an average repair cost of $20 per machine. During the year, the company honored warranty contracts on 8 machines. Use the above information to compute the below: 1) The number of estimated defective units is: * a) 20 units b) 25 units c) 30 units d) None of the above 2) The estimated warranty expense of the...
2. Estimated Warranty Liability Cook-Rite Co. sold $651,000 of equipment during January under a six-month warranty....
2. Estimated Warranty Liability Cook-Rite Co. sold $651,000 of equipment during January under a six-month warranty. The cost to repair defects under the warranty is estimated at 4% of the sales price. On August 15, a customer required a $274 part replacement, plus $101 of labor under the warranty. Required: (a) Provide the journal entry for the estimated warranty expense on January 31 for January sales. Jan. 31 Accounts Payable Product Warranty Expense Feedback Contingent liability entries are needed when...
EarlKeen Co. sold $270,000 of equipment during January under a one-year warranty. The cost to repair...
EarlKeen Co. sold $270,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 6% of the sales price. On August 15, a customer required a $115 part replacement plus $46 of labor under the warranty. Provide the journal entry for (a) the estimated warranty expense on January 31 for January sales on page 10 of the journal and (b) the August 15 warranty work on page 14 of the journal....