A+ Appliances, Inc. is in its first year of operations. The company sells household appliances with...
A+ Appliances, Inc. is in its first year of operations. The company sells household appliances with a warranty which covers manufacturing defects. Since A+ Appliances, Inc. does not have historical sales and defect information, they estimate that if every appliance sold needed repairs, the range of costs would be between $500,000 and $750,000. How much warranty expense should A+ Appliances, Inc. record in 20X1?
Ps. 625,000 is NOT a correct answer.
Homework Answers
The range of costs given is $500000 to $750000. Here, since no amount in the range is a better estimate, so the warranty expense that should be recorded in the period should be the minimum amount in the range. So, $500000 should be accrued as warranty expense and a note disclosing the possibility of an additional $250000 loss should be presented.
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A+ Appliances, Inc. is in its first year of operations. The
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Vaughn Inc., in its first year of operations, has the following differences between the book basis...
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differences between the book basis and tax basis of its assets and
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Tax Basis
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$198,000
$-0-
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8) 8) A company sells its product subject to a warranty that covers the cost of parts and labour for repairs during the six months after sale. Warranty costs are estimated to be 4.5% of sales for parts, and 1.5% of sales for labour. During the month of June, the company performed warranty work and used $8,000 worth of parts and paid $4,000 in wages for labour to do the warranty work. Sales for June amounted to $450,000. (1) What...
8) 8) A company sells its product subject to a warranty that covers the cost of parts and labour for repairs during the six months after sale. Warranty costs are estimated to be 4.5% of sales for parts, and 1.5% of sales for labour. During the month of June, the company performed warranty work and used $8,000 worth of parts and paid $4,000 in wages for labour to do the warranty work. Sales for June amounted to $450,000. (1) What...
Vaughn Inc., in its first year of operations, has the following
differences between the book basis and tax basis of its assets and
liabilities at the end of 2019.
Book Basis
Tax Basis
Equipment (net)
$413,000
$356,900
Estimated warranty liability
$198,000
$-0-
It is estimated that the warranty liability will be settled in
2020. The difference in equipment (net) will result in taxable
amounts of $18,200 in 2020, $28,400 in 2021, and $9,500 in 2022.
The company has taxable income...
During its first year of operations, Signature Lamp Company Inc. had sales of $845,000, all on account. Industry experience suggests that Signature Lamp Company's bad debt expense will be $31,500. Signature Lamp Company ended the year 2016 with accounts receivable of $82,000 and an allowance for uncollectible accounts of $17.500. During 2017. Signature Lamp Company completed the following transactions: 1. Credit sales, $1,050,000 2. Collections on account, $886.000 3. Write-offs of uncollectibles, $12,000 4. Bad debt expense, $31,500 Journalize the...
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