Question

The following information applies to questions 9 – 11:

A truck that cost $8,400 and on which $6,300 of accumulated depreciation has been recorded was sold on January 1, the first day of the year.

9. Assume the truck was traded for new equipment valued at $12,000 and that a $2,400 trade-in allowance was given for the truck. The entry to record the exchange would include:

		a. a credit to Cash for $9,600
		b. a debit to Loss on Disposal for $300
		c. credit to the Truck account for $6,300
		d. a credit to the Equipment account for $12,000

10. Assume the truck was sold for $2,500 cash. The entry to record the sale would include:

		a. a debit to the Truck account for $8,400
		b. a debit to the Accumulated Depreciation account for $6,300
		c. a credit to Cash for $2,500
		d. a debit to Loss on Disposal of $400

11. How much Product Warranty Expense should be recorded for a month in which 500 units were sold?

		a. $50
		b. $500
		c. $10
		d. $5,000

The following information applies to questions 12 & 13:

Product Y is sold with a warranty offering free replacement if the product fails within one year of use. The product costs $50 to produce, and it is estimated that 2% of units sold will fail and be replaced.

If 12 units of Product Y were actually replaced during the month, the journal entry to record this would include:

		a. a debit to Inventory for $600
		b. a debit to Warranty Expense for $600
		c. a credit to Cash for $600
		d. a debit to Estimated Product Warranty Liability for $600

Answer 1