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Chapter 13: Q.13-10E (page 695)

E13-10 (L03) (Warranties) Soundgarden Company sold 200 color laser copiers on July 10, 2017, for \(4,000 apiece, together with a 1-year warranty. Maintenance on each copier during the warranty period is estimated to be \)330.

Instructions

Prepare entries to record the sale of the copiers, the related warranty costs, and any accrual on December 31, 2017. Actual warranty costs (inventory) incurred in 2017 were $17,000.

Short Answer

Expert verified

Answer:

The amount of sales revenue for the company is $800,000.

Step by step solution

01

Meaning of Journal Entry

The journal entry is the act of keeping a record of any transactions and events, either economic or non-economic. The recording of journal entry includes Serial number or transaction number, Date, Accounts titles and explanations, debit and credit, and narrations.

02

Recording of the entries

Date

Accounts Titles and Explanations

Debit

Credit

July 10, 2017

Cash

$800,000

Sales Revenue

$800,000

Dec 31, 2017

Warranty Expenses

$17,000

Inventory

$17,000

Dec 31, 2017

Warranty Expenses

$49,000

Warranty Liability

$49,000

Explanations:

Sales Revenue = (200 脳 $4,000) = $800,000

Warranty expenses = $17,000 (Given)

Warranty liability = [(200 脳 330) - $17,000] = ($66,000 - $17,000) = $49,000

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Most popular questions from this chapter

CA13-7 ETHICS (Warranties) The Dotson Company, owner of Bleacher Mall, charges Rich Clothing Store a rental fee of \(600 per month plus 5% of yearly profits over \)500,000. Matt Rich, the owner of the store, directs his accountant, Ron Hamilton, to increase the estimate of bad debt expense and warranty costs in order to keep profits at $475,000.

Instructions

Answer the following questions.

(a) Should Hamilton follow his boss鈥檚 directive?

(b) Who is harmed if the estimates are increased?

(c) Is Matt Rich鈥檚 directive ethical?

Faith Battle operates a health food store, and she has been the only employee. Her business is growing, and she is considering hiring some additional staff to help her in the store. Explain to her the various payroll deductions that she will have to account for, including their potential impact on her financial statements, if she hires additional staff.

Question: Explain how trading debt securities are accounted for and reported?

Where can authoritative IFRS be found related to investments?

(Fair Value Measurement) Presented below is information related to the purchases of common stock by Lilly

Company during 2017.

Cost Fair Value

(at purchase date) (at December 31)

Investment in Arroyo Company stock \(100,000 \) 80,000

Investment in Lee Corporation stock 250,000 300,000

Investment in Woods Inc. stock 180,000 190,000

Total \(530,000 \)570,000

Instructions

(Assume a zero balance for any Fair Value Adjustment account.)

(a) What entry would Lilly make at December 31, 2017, to record the investment in Arroyo Company stock if it chooses to

report this security using the fair value option?

(b) What entry(ies) would Lilly make at December 31, 2017, to record the investments in the Lee and Woods corporations,

assuming that Lilly did not select the fair value option for these investments?
See all solutions

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