Dill Computer warranties their $3,000 laptops for 2 years. Typical repair costs for units returned (labor...
Dill Computer warranties their $3,000 laptops for 2 years. Typical repair costs for units returned (labor and parts): $100/unit. Usually, only 3% of units sold need repair in the first year after sale, and 4% in year 2. Dill also sells an extended warranty, offering 3 years of additional protection, for $75; usually, only 15% of units sold in a given year need repairs within the 3-year period that begins 2 years after the sale. In year 2kC, Dill Computer sells 1,200 laptops. They also sell 500 extended warranties. (A) Provide the entries to accrue warranty expense for the usual 2-year period and (B) Defer revenue using the "sales" method for the extended warranties. (C) Is Dill "making money" on their extended warranty sales? If so, how much? Please walk me through the question step by step
Homework Answers
a.
| Units sold | 1200 | |
| Repair Costs per unit ($) | 100 | |
| 1st year (3%) | 2nd year (4%) | |
| Repairing units | 36 | 48 |
| 3600 | 4800 | |
| Warranty Expense | 8400 |
b.
| Revenue for extended warranties | 500*75 |
| ($) |
37500 |
c.
| A | Warranty Expenses ($) | 8400 |
| B | Extended warranty Revenues ($) | 37500 |
| C | Profit due to extended revenues ($) B-A | 29100 |
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Dill Computer warranties their $3,000 laptops for 2 years.
Typical repair costs for units returned (labor...
Assume now that we use the "usual accrual" method to account for warranties during the first...
Assume now that we use the "usual accrual" method to account for warranties during the first 2 years after a sale. However, we also sell an "extended 2-year warranty" for $30 per unit, in addition to the $5k price/unit. Thus, assume we sell 1,000 extended warranties at $30 each in January 2kA. Account for this using the warranty sales method, assuming only 10% of units covered normally need repair during any given 2-year period, and the average cost per repair...
Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides...
Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides a one-month warranty that is included in the cost of the computer. Claims under the warranties vary from replacing defective items to providing customers with refunds if they choose. During 2020, the estimated costs related to the one-month warranties was $39,600, of which $36,500 had been incurred before year end ($29,700 for replacement items and $6,800 in refunds). For an additional charge of $100,...
Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides...
Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides a one-month warranty that is included in the cost of the computer. Claims under the warranties vary from replacing defective items to providing customers with refunds if they choose. During 2020, the estimated costs related to the one-month warranties was $39,600, of which 536,500 had been incurred before year end ($29,700 for replacement items and $6,800 in refunds). For an additional charge of $100,...
For #2, how do make the J.E as the costs is more than the remaining unearned...
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Question 6 Pharoah Corp. manufactures a wide range of equipment. The company’s biggest seller is the...
Question 6
Pharoah Corp. manufactures a wide range of equipment. The
company’s biggest seller is the Whatchamacallit, which sells for
$4,700 each. Starting in 2020 Whatchamacallit now carries with it a
2-year warranty against manufacturing defects. In addition to this
warranty, customers can purchase an optional extended warranty for
$1,510 extra that extends the Whatchamacallit’s warranty an
additional 2 years. From experience with similar products, Pharoah
Corp. has determined that each Whatchamacallit sold will average
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Recording and Reporting Warranties Macy Furniture sells a line of products that carry a three-year warranty...
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Accountancy
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Marin Inc. sells portable computer equipment with a two-year
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2020, the corporation sells for cash 380 computers at a unit price
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two-year warranty costs are estimated to be $166 for parts and $189
for labour per unit. (For simplicity, assume that all sales
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Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides a one-month warranty that is included in the cost of the computer. Claims under the warranties vary from replacing defective items to providing customers with refunds if they choose. During 2020, the estimated costs related to the one-month warranties was $39,600, of which $36,500 had been incurred before year end ($29,700 for replacement items and $6,800 in refunds). For an additional charge of $100,...
Computers Galore Ltd. sells computers, computer accessories, and software. On its computer sales, the company provides a one-month warranty that is included in the cost of the computer. Claims under the warranties vary from replacing defective items to providing customers with refunds if they choose. During 2020, the estimated costs related to the one-month warranties was $39,600, of which 536,500 had been incurred before year end ($29,700 for replacement items and $6,800 in refunds). For an additional charge of $100,...
For #2, how do make the J.E as the costs is more than
the remaining unearned revenue ( I think).
On January 2, 2020, Magnus Manufacturing Company, a private company following ASPE, sold machinery with a 2-year warranty against manufacturing defects. Magnus also sold a 2-year extended warranty on these machines. Each machine and warranty is sold on account. Additional information regarding both the sales and warranties follows: $ $ Sale price of each machine Estimated cost of replacement parts...
Question 6
Pharoah Corp. manufactures a wide range of equipment. The
company’s biggest seller is the Whatchamacallit, which sells for
$4,700 each. Starting in 2020 Whatchamacallit now carries with it a
2-year warranty against manufacturing defects. In addition to this
warranty, customers can purchase an optional extended warranty for
$1,510 extra that extends the Whatchamacallit’s warranty an
additional 2 years. From experience with similar products, Pharoah
Corp. has determined that each Whatchamacallit sold will average
$1,010 in replacement parts (ignore...
Recording and Reporting Warranties Macy Furniture sells a line of products that carry a three-year warranty against defects at no extra charge. Based on industry experience, the estimated warranty costs are as follows: first year following the year of sale, 1% of sales; second year following the year of sale, 3% of sales, and third year following the year of sale, 5% of sales. Sales and actual warranty expenditures for the first three-year period were: Cash Actual Warranty Expenditures 2020...
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warranty contract that requires the corporation to replace
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2020, the corporation sells for cash 380 computers at a unit price
of $2,550. Ignore any cost of goods sold. Based on experience, the
two-year warranty costs are estimated to be $166 for parts and $189
for labour per unit. (For simplicity, assume that all sales
occurred on December 31, 2020.) The warranty is...
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