Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Question
Chapter 8, Problem 79BPSB
To determine
(a)
Introduction:
Warranty claims are expected in the future but they should be recorded as warranty expense in year of sale as it helped in generating the revenue.
To calculate:
Warranty Expense for year 2019.
To determine
(b)
Introduction:
Warranty claims are expected in the future but they should be recorded as warranty expense in year of sale as it helped in generating the revenue.
To record:
Payment made towards warranty claims.
To determine
(c)
Introduction:
Warranty claims are expected in the future but they should be recorded as warranty expense in year of sale as it helped in generating the revenue.
To show:
Balance in warranty liability account along with the reasons.
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Montague Auto Repair specializes in the repair of foreign car transmissions. To encourage business, Montague offers a 6-month warranty on all repairs. The following data are available for 2019:
Transmissions repaired, 2019
4,800
Expected frequency of warranty claims
0.09
per repair
Actual warranty claims, 2019
$137,750
Estimated warranty liability, 1/1/19
$25,000
Estimated cost of each warranty claim
$300
Assume that warranty claims are paid in cash.
Required:
1.
Compute the warranty expense for 2019.
2.
Prepare the entry to record the payment of the 2019 warranty claims.
3.
Conceptual Connection: What is the December 31, 2019, balance in the warranty liability account? Why has the balance in the warranty liability account changed from January 1, 2019?
Recall that Cookie Creations sells fine European mixers that it purchases from Kzinski
Supply Co. Kzinski warrants the mixers to be free of defects in material and workmanship
for a period of one year from the date of original purchase. If the mixer has such a defect,
Kzinski will repair or replace the mixer free of charge for parts and labor. The product must
be shipped prepaid to an authorized Kzinski service center. The cost to ship the mixer is
paid by the consumer. The cost to return the product to the consumer is paid by Kzinski.
The authorized service center is located in Boston. Because Cookie Creations values
serving its customers, it pays the shipping to Boston for any mixers needing repair under
Kzinski's warranty terms. Based on past experience, Kzinski has found that approximately
10% of mixers are returned for repair or replacement. The average cost to ship a mixer to
Boston is $60.
The following transactions take place in 2020 and 2021.
1. A total of 30 mixers are sold…
Riviera Interior Design had the following transactions for the year ended 30 June 2020: This
business is registered for GST
1 July 2019
Created a provision for warranties for $7,600.
None had previously existed.
1 April
2020
Agreed to accept a 90-day (due date fixed) bill
of exchange from CBD Wholesalers in relation
to an overdue account payable of $8,700,
together with interest at 5% per year.
30 May
2020
Riviera Interior Design pays the bill payable to
Zed Manufacturers.
14 June
2020
A successful claim was made by a customer for
a fault in an antique table they had previously
purchased. The antique table was under
warranty. The cost to rectify the fault was
$627 including GST which was paid in cash.
The payroll and payroll deductions for June
2020 were as follows:
Gross wages
$63,120
30 June
2020
PAYG tax
$18,936
Superannuation contributions
Medical insurance
$4,080
Required:
Prepare general journal entries to record the above transactions. Narrations are not required.
$5,996
Chapter 8 Solutions
Cornerstones of Financial Accounting
Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ
Ch. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Refer to the information for Kinsella Seed above....Ch. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQCh. 8 - Prob. 9MCQCh. 8 - When a credit is made to federal income taxes...Ch. 8 - Prob. 11MCQCh. 8 - Prob. 12MCQCh. 8 - Prob. 13MCQCh. 8 - Prob. 14MCQCh. 8 - Prob. 15MCQCh. 8 - Prob. 16MCQCh. 8 - Prob. 17MCQCh. 8 - Which of the following transactions would cause...Ch. 8 - Issuing Notes Payable On June 30, Carmean Inc....Ch. 8 - Notes Payable Rogers Machinery Company borrowed...Ch. 8 - Prob. 21CECh. 8 - Accrued Interest On March 1, the Garner...Ch. 8 - Prob. 23CECh. 8 - Prob. 24CECh. 8 - Sales Tax Cobb Baseball Bats sold 45 bats for $50...Ch. 8 - Payroll Taxes Hernandez Builders has a gross...Ch. 8 - Prob. 27CECh. 8 - Prob. 28CECh. 8 - Unearned Sales Revenue Brand Landscaping offers a...Ch. 8 - Prob. 30CECh. 8 - Prob. 31CECh. 8 - Prob. 32CECh. 8 - Liquidity Ratios NWAs financial statements contain...Ch. 8 - Prob. 34CECh. 8 - Accounts Payable On May 18, Stanton Electronics...Ch. 8 - Accounts and Notes Payable On February 15, Barbour...Ch. 8 - Issuing Notes Payable On September 30, Bello...Ch. 8 - Notes Payable Renchen Company, which manufactures...Ch. 8 - Accrued Interest On July 1, Brimley Company issued...Ch. 8 - Accrued Interest On May 1, the Garnett Corporation...Ch. 8 - Accrued Property Taxes Annual property taxes...Ch. 8 - Accrued Income Taxes Nolan Inc. had taxable income...Ch. 8 - Prob. 43BECh. 8 - Accrued Wages A company employs a part-time staff...Ch. 8 - Prob. 45BECh. 8 - Prob. 46BECh. 8 - Prob. 47BECh. 8 - Prob. 48BECh. 8 - Payroll Taxes Sids Grocery Store has 100 employees...Ch. 8 - Prob. 50BECh. 8 - Payroll Taxes Its the Tooth Dental works to...Ch. 8 - Unearned Sales Revenue Curtiss Carpet Cleaning...Ch. 8 - Unearned Rent Revenue Mannion Property Management...Ch. 8 - Contingent Liabilities Many companies provide...Ch. 8 - Prob. 55BECh. 8 - Prob. 56BECh. 8 - Prob. 57BECh. 8 - Liquidity Ratios JRLs financial statements contain...Ch. 8 - Prob. 59BECh. 8 - Prob. 60ECh. 8 - Recording Various Liabilities Glenview Hardware...Ch. 8 - Recording Various Liabilities Plymouth Electronics...Ch. 8 - Reporting Liabilities Morton Electronics had the...Ch. 8 - Accounts Payable Sleek Ride, a company providing...Ch. 8 - Accrued Liabilities Charger Inc. had the following...Ch. 8 - Accrued Liabilities Thornwood Tile had the...Ch. 8 - Prob. 67ECh. 8 - Payroll Accounting and Discussion of Labor Costs...Ch. 8 - Unearned Revenue Jennifers Landscaping Services...Ch. 8 - Prob. 70ECh. 8 - Warranties Eds Athletics sells bicycles and other...Ch. 8 - Ratio Analysis Intel Corporation provided the...Ch. 8 - Payable Transactions Richmond Company engaged in...Ch. 8 - Payroll Accounting Jet Enterprises has the...Ch. 8 - Note Payable and Accrued Interest Fairbome Company...Ch. 8 - Prob. 76APSACh. 8 - Prob. 77APSACh. 8 - Prob. 78APSACh. 8 - Prob. 79APSACh. 8 - Ratio Analysis Consider the following information...Ch. 8 - Payable Transactions Daniels Company engaged in...Ch. 8 - Payroll Accounting McLaughlin Manufacturing has...Ch. 8 - Note Payable and Accrued Interest Ellsworth...Ch. 8 - Prob. 76BPSBCh. 8 - Prob. 77BPSBCh. 8 - Prob. 78BPSBCh. 8 - Prob. 79BPSBCh. 8 - Ratio Analysis Consider the following information...Ch. 8 - Prob. 81.1CCh. 8 - Prob. 81.2CCh. 8 - Prob. 81.3CCh. 8 - Prob. 82.1CCh. 8 - Prob. 82.2CCh. 8 - Prob. 82.3CCh. 8 - Prob. 83.1CCh. 8 - Prob. 83.2CCh. 8 - Prob. 83.3CCh. 8 - Prob. 83.4CCh. 8 - Prob. 83.5CCh. 8 - Prob. 83.6CCh. 8 - Prob. 83.7CCh. 8 - Prob. 83.8CCh. 8 - Prob. 83.9CCh. 8 - Prob. 84.1CCh. 8 - Prob. 84.2CCh. 8 - Prob. 84.3CCh. 8 - Prob. 84.4CCh. 8 - Prob. 84.5CCh. 8 - Comparative Analysis: Under Armour, Inc., versus...Ch. 8 - Prob. 84.7CCh. 8 - Prob. 84.8CCh. 8 - Prob. 85.1CCh. 8 - Prob. 85.2CCh. 8 - Prob. 85.3C
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