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Homework Answers
Ans: 1. Any extended warranty of a product is sold separately from the warranty product and it constitutes a separate sales transaction therefore it is not a contingency loss.and revenue should be recognized over the same period.
2. Revenue is deferred as Liability and warranty expense is computed using the straight- line basis over the contract period
3. Journal entry
| Account title and explanation | Debit($) | Credit($) |
| Accounts receivable | $432,000 | |
| unearned-revenue extended warranties | $432,000 | |
| ( to record sale of extended warranties) | ||
| unearned-revenue extended warranties | 60,750 | |
| revenue-extended warranties | 60,750 | |
| (to record revenue on extended warranty) |
Working:
=432,000*9/12
= 324,000
so during that 9 month period ,the 324,000 is outstanding an average of 4.5 months and so should earn( 324,000*4.5/24)
= 60,750
Add Answer to:
Exercise 13-16 Extended warranties [LO13-5, 13-6] Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's...
Exercise 13-16 (Algo) Extended warranties (LO13-5, 13-6) Carnes Electronics sells consumer electronics that carry a 90-day...
Exercise 13-16 (Algo) Extended warranties (LO13-5, 13-6) Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $414,000 for these extended warranties (approximately evenly throughout the year) Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended...
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase,...
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $444,000 for these extended warranties (approximately evenly throughout the year). Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty...
Cames Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase,...
Cames Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $440,000 for these extended warranties (approximately evenly throughout the year) Required: 1-0. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty...
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer’s warranty. At the time of purchase,...
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer’s warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $422,000 for these extended warranties (approximately evenly throughout the year). 1.). Prepare journal entries that summarize sales of the extended warranties (assume all credit sales) and any aspects of the warranty that should be recorded during the year. Prepare journal entries that...
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase,...
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $412,000 for these extended warranties (approximately evenly throughout the year) Required 1-a. Does this situation represent a provision? Yes No 1-b. How should it be accounted for? Revenue is deferred as a liability sale, and recognized on straight-line basis at the time of...
I have figured that the A/R journal entry should be cash. But I cannot find out...
I have figured that the A/R journal entry should be cash. But I
cannot find out the values for the two journal entries for No. 2. I
have attempted $444,000/2= $222,000.00 but that answer is
incorrect.
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $444,000 for these extended warranties (approximately evenly...
Hardin Widget Manufacturing began operations in January 2021. Hardin sells widgets that carry a two-year manufacturer's...
Hardin Widget Manufacturing began operations in January 2021. Hardin sells widgets that carry a two-year manufacturer's warranty against defects in workmanship. Hardin's management projects that 1% of the widgets will require repair during the first year of the warranty while approximately 5% will require repair during the second year of the warranty. The widgets sell for $500 each. The average cost to repair a widget is $60. The company sells 70% of the widgets to retail customers who must pay...
Hardin Widget Manufacturing began operations in January 2021. Hardin sells widgets that carry a two-year manufacturer's...
Hardin Widget Manufacturing began operations in January 2021. Hardin sells widgets that carry a two-year manufacturer's warranty against defects in workmanship. Hardin's management projects that 2% of the widgets will require repair during the first year of the warranty while approximately 6% will require repair during the second year of the warranty. The widgets sell for $400 each. The average cost to repair a widget is $60. The company sells 60% of the widgets to retail customers who must pay...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE. THANK YOU! Exercise 13-20 (Algo) Various...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE.
THANK YOU!
Exercise 13-20 (Algo) Various transactions involving contingencles (LO13-5, 13-6) The following selected transactions relate to contingencles of Classical Tool Makers, Inc., which began operations In July 2021. Classical's fiscal year ends on December 31. Financial statements are issued in April 2022 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs are expected to approximate 3% of sales. Sales were $2.3 million...
Problem 6-2 (Static) Performance obligations; warranties; option (LO6-2, 6-4, 6-5) Creative Computing sells a tab...
Problem 6-2 (Static) Performance obligations; warranties; option (LO6-2, 6-4, 6-5) Creative Computing sells a tablet computer called the Protab. The $780 sales price of a Protab Package includes the following: • One Protab computer, • A6 month limited warranty. This warranty quarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to six months. • A coupon to purchase a Creative Probook e-book reader for $200, a price that represents...
Exercise 13-16 (Algo) Extended warranties (LO13-5, 13-6) Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $414,000 for these extended warranties (approximately evenly throughout the year) Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended...
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $444,000 for these extended warranties (approximately evenly throughout the year). Required: 1-a. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty...
Cames Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $440,000 for these extended warranties (approximately evenly throughout the year) Required: 1-0. Does this situation represent a loss contingency? 1.b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty...
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $412,000 for these extended warranties (approximately evenly throughout the year) Required 1-a. Does this situation represent a provision? Yes No 1-b. How should it be accounted for? Revenue is deferred as a liability sale, and recognized on straight-line basis at the time of...
I have figured that the A/R journal entry should be cash. But I
cannot find out the values for the two journal entries for No. 2. I
have attempted $444,000/2= $222,000.00 but that answer is
incorrect.
Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $444,000 for these extended warranties (approximately evenly...
Hardin Widget Manufacturing began operations in January 2021. Hardin sells widgets that carry a two-year manufacturer's warranty against defects in workmanship. Hardin's management projects that 1% of the widgets will require repair during the first year of the warranty while approximately 5% will require repair during the second year of the warranty. The widgets sell for $500 each. The average cost to repair a widget is $60. The company sells 70% of the widgets to retail customers who must pay...
Hardin Widget Manufacturing began operations in January 2021. Hardin sells widgets that carry a two-year manufacturer's warranty against defects in workmanship. Hardin's management projects that 2% of the widgets will require repair during the first year of the warranty while approximately 6% will require repair during the second year of the warranty. The widgets sell for $400 each. The average cost to repair a widget is $60. The company sells 60% of the widgets to retail customers who must pay...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE.
THANK YOU!
Exercise 13-20 (Algo) Various transactions involving contingencles (LO13-5, 13-6) The following selected transactions relate to contingencles of Classical Tool Makers, Inc., which began operations In July 2021. Classical's fiscal year ends on December 31. Financial statements are issued in April 2022 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs are expected to approximate 3% of sales. Sales were $2.3 million...
Problem 6-2 (Static) Performance obligations; warranties; option (LO6-2, 6-4, 6-5) Creative Computing sells a tablet computer called the Protab. The $780 sales price of a Protab Package includes the following: • One Protab computer, • A6 month limited warranty. This warranty quarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to six months. • A coupon to purchase a Creative Probook e-book reader for $200, a price that represents...
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