A company offers a cash rebate of P1 on each P4 package of light bulbs sold since 2015. Historically, 10% of customers mail in the rebate form. During 2020, 5,000,000 packages of light bulbs are sold, and 150,000 P1 rebates are mailed to customers. What is the rebate liability to be shown on the 2020 financial statements dated December 31?

A company offers a cash rebate of P1 on each P4 package of light bulbs sold since 2015. Historically, 10% of customers mail in the rebate form. During 2020, 5,000,000 packages of light bulbs are sold, and 150,000 P1 rebates are mailed to customers. What is the rebate liability to be shown on the 2020 financial statements dated December 31?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 10E

See similar textbooks

Similar questions

Gear Up Co. pays 65% of its purchases in the month of purchase, 30% in the month after the purchase, and 5% in the second month following the purchase. What are the cash payments if it made the following purchases in 2018?
A company offers a cash rebate of $1 on each $4 package of light bulbs sold during 2021. Historically, 10% of customers mail in the rebate form. During 2021, 3700000 packages of light bulbs are sold, and 190000 $1 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the 2021 financial statements dated December 31? $370000; $370000 $190000; $180000 $370000; $180000 $180000; $180000
abc company offers a cash rebate of P1 on each P4 package of light bulbs sold during 2022. Historically, 10% of customers mail in the rebate form. During 2022, 4,000,000 packages of light bulbs are sold, and 140,000 P1 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the 2022 financial statements dated December 31? P140,000; P260,000 P100,000; P40,000 P400,000; P260,000 P260,000; P260,000
YellowCard ASA manufactures accessories for iPods, iPhones, and iPads. It had the following selected transactions during calendar 2019. (For any part of this problem requiring an interest or discount rate, use 10%.) 1. YellowCard provides a 2-year warranty on its docking stations, which it began selling in 2019. YellowCard estimates that €45,000 will be spent in the future to service warranties related to 2019 sales. During 2019, YellowCard spent €6,000 servicing warranty claims. 2. YellowCard has a 1-year €200,000 loan outstanding from UBS. The loan is set to mature on February 28, 2020. For several years, UBS has agreed to extend the loan, as long as YellowCard makes all of its quarterly interest payments (interest is due on the last days of each February, May, August, and November) and maintains an acid-test ratio (also called quick ratio) of at least 1.25. On December 10, 2019, UBS provided YellowCard a commitment letter indicating that UBS will extend the loan another 12 months,…
AAA Company sells gift certificates that expire one year after their issuance. Information on gift certificates is shown below: Unearned revenue – gift certificates, January 1, 2020 - 600,000Gift certificates sold during 2019 - 1,000,000Prior year gift certificates redeemed in 2020 - 400,000Gift certificates sold and redeemed in 2020 - 700,000 How much is the unearned revenue from gift certificates as of December 31, 2020?
Best Appliance Store offers a two-year warranty on all appliances sold. The company estimates that 5% of all appliances sold need to be serviced at an average cost of $50 each. At December 31, 2020, the Warranty Liability account had a balance of $19,000. During 2021, the store spends $10,000 repairing 200 appliances. An additional 3,500 appliances are sold in 2021. On the 2021 income statement, warranty expense will be: a. $8,750 Cb. $10,000 C. $8,500 d. $9,000
Landfall Navigation began operations in 2024 and provides a one-year warranty on the products it sells. They estimate that 20,000 of the 400,000 units sold in 2024 will be returned for repairs and that these repairs will cost $8 per unit. The cost of repairing 16,000 units presented for service in 2024 was $128,000. Landfall should report a. warranty expense of $32,000 for 2024. b. warranty expense of $160,000 for 2024. c. warranty liability of $160,000 on December 31, 2024. d. no warranty obligation on December 31, 2024 since this is only a provision.
YellowCard ASA manufactures accessories for iPods, iPhones, and iPads. It had the following selected transactions during 2019. (For any part of this problem requiring an interest or discount rate, use 10%.) 1. YellowCard provides a 2-year warranty on the quality of its docking stations, which it began selling in 2019. YellowCard estimates that €45,000 will be spent in the future to warranties related to 2019 sales. During 2019, YellowCard spent €6,000 warranty claims. 2. YellowCard has a 1 year €200,000 loan outstanding from UBS. The loan is set to mature on February 28, 2020. YellowCard makes all of its quarterly interest payments (i.e. interest is due on the last days of each February, May, August, and November). For several years, UBS has agreed to extend the loan, as long as the firm maintains an acid-test ratio of at least 1.25 (Hint: the loan has always been extended and refinanced throughout years before 2019). On December 10, 2019, UBS provided YellowCard acommitment letter…
Best Appliance Store offers a two-year warranty on all appliances sold. The company estimates that 5% of all appliances sold need to be serviced at an average cost of $50 each. At December 31, 2020, the Warranty Liability account had a balance of $19,000. During 2021, the store spends $10,000 repairing 200 appliances. An additional 3,500 appliances are sold in 2021. On the 2021 income statement, warranty expense will be: Oa. $8,750 b. $10,000 CC $8,500 d. $9,000
ABC Company started its business in 2019. It sells an equipment with a 3- year warranty. ABC estimates its warranty costs as a percentage of peso sales. Based on past experience, it is estimated that 4% will be repaired in the first year of warranty, 8% on the second year of warranty and 10% at the last year of warranty period. In 2019, 2020 and 2021, the company was able to sell 10,000 units, 12,000 units and 15,000 units, respectively at a selling price of P 7,500 per unit. The company also incurred actual repair costs of P 500,000, P 1,000,000, and 1,500,000 for years 2019,2020 and 2021, respectively. What amount should ABC Company report as warranty liability as of December 31,2020? P 34,800,000 P 36,300,000 P 58,050,000 P 34,300,000
During 2019, Angel Co. introduced a new line of appliances that carry a three-year warranty against manufacturer’s defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: Sales Actual Warranty Expenditures2019 P 400,000 P 6,0002020 1,000,000 30,0002021 1,400,000 90,000 P2,800,000 P126,000 assume that sales and repairs occurs evenly through-out the year, how much is the estimated warranty liability at December 31, 2021?
At December 31, 2020, Feel Company had 20,000 gift certificates outstanding, which had been sold to customers during 2020 for P500 each. Feel operates on a gross margin of 60% of its sales. What amount of revenue pertaining to the 20,000 gift certificates should be deferred at December 31, 2020? *