Question

1. Marigold Corp. estimates its annual warranty expense as 3% of annual net sales. The following data relate to the calendar year 2021:

Net sales			$1506000
Warranty liability account
Balance, Dec. 31, 2020			$13000		debit before adjustment
Balance, Dec. 31, 2021			32180		credit after adjustment

Which one of the following entries was made to record the 2021 estimated warranty expense?

a	Warranty Expense 32180     Warranty Liability 32180

b	Warranty Expense 37635 Retained Earnings (prior-period adjustment) 7545     Warranty Liability 45180

c	Warranty Expense 45180     Warranty Liability 45180

d	Warranty Expense 45180     Retained Earnings (prior-period adjustment) 7545     Warranty Liability 37635

2. Crane Company has 60 employees who work 8-hour days and are paid hourly. On January 1, 2020, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2020 may first be taken on January 1, 2021. Information relative to these employees is as follows:

Year		Hourly Wages		Vacation Days Earned by Each Employee		Vacation Days Used by Each Employee
2020		$26.50		10			0
2021		28.50		10			8
2022		31.50		10			10

Crane has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned.

What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2022?

a

$203760.

b

$405360.

c

$151200.

d

$178560.

3. Vaughn Co. is a retail store operating in a state with a 7% retail sales tax. The retailer may keep 2% of the sales tax collected. Vaughn Co. records the sales tax in the Sales Revenue account. The amount recorded in the Sales Revenue account during May was $762910.

The amount of sales taxes (to the nearest dollar) for May is

a

$62846.

b

$49910.

c

$53405.

d

$68453

Answer 1

Bc E A 1 2 Warranty Expense 3 Warranty Liability 45180 45180 2 2021 27360 2022 151200 9 Total 178560 10 11 = Hourly x 8 hours x Number of unexpired days x Number of workers 12 762910 13 14 Sales Including TAX 15 16 Sales 17 Tax 18 Sales+TAX 19 20 Tax Amount in Sale 100 7 107 49910

11 2 Warranty Expense 3 Warranty Liability =1506000*3% =+B2 52 7 2021 =28.5*8*2*60 8 2022 =31.5*8*10*60 9 Total =SUM(B7:38) 10 11 = Hourly x 8 hours x Number of unexpired day 12 13 3 14 Sales Including TAX [762910 15 16 Sales 100 17 Tax =+B16*7% 18 Sales+TAX I=+B16+B17 19 20 Tax Amount in Sale =+B14/B18*7