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Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 13, Problem 13.3MC
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To identify: The correct option.
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Grouper Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated
warranty costs related to dollar sales are as follows: first year after sale-3% of sales; second year after sale-4% of sales; and third
year after sale-5% of sales. Sales and actual warranty expenditures for the first three years of business were:
Sales
Warranty
Expenditures
2021
$870,000
$17,100
2022
1,010,000
48,400
2023
1,041,000
80,000
(a) Calculate the amount that Grouper should report as warranty expense on its 2023 income statement and as a warranty liability on
its December 31, 2023 SFP using the assurance-type warranty (expense-based approach). Assume that all sales are made evenly
throughout each year and that warranty expenditures are also evenly spaced according to the rates above.
Warranty expense
$
Warranty liability
$
During Year 3, the Seahawks Inc. sold 150 dune buggies for $4,000 each. The dune buggies carry a five-year warranty for defects. Estimates are that repair costs will
average 4% of the total selling price. The warranty liability at the beginning of the year was $14,000, and $20,000 in claims was actually incurred during Year 3 to honour
warranties.
Refer to Seahawks Inc. What is the balance in the warranty liability at the end of the Year 2?
O $24,000
O $18,000
$14,000
O $38,000
Concord Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on
experience, the estimated warranty costs related to dollar sales are as follows: first year after sale-2% of
sales; second year after sale-4% of sales; and third year after sale-5% of sales. Sales and actual warranty
expenditures for the first three years of business were: Sales Warranty Expenditures 2021 $750,000 $
15,900 2022 1,010,000 46, 000 2023 1,017, 000 80,000 (a) Calculate the amount that Concord should
report as warranty expense on its 2023 income statement and as a warranty liability on its December
31, 2023 SFP using the assurance - type warranty (expense - based approach). Assume that all sales are
made evenly throughout each year and that warranty expenditures are also evenly spaced according to the
rates above. Warranty expense Warranty liability
Chapter 13 Solutions
Intermediate Accounting (2nd Edition)
Ch. 13 - Prob. 13.1QCh. 13 - Prob. 13.2QCh. 13 - Prob. 13.3QCh. 13 - Do sellers recognize sales taxes as expenses on...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Prob. 13.7QCh. 13 - What is a gam contingency? Is It accrued and...Ch. 13 - Do firms always accrue and record loss...Ch. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Prob. 13.13QCh. 13 - Prob. 13.14QCh. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.1MCCh. 13 - Prob. 13.2MCCh. 13 - Prob. 13.3MCCh. 13 - Medical Services Inc allows employees at the end...Ch. 13 - Trade Notes Payables. On February 1, Seville...Ch. 13 - Unearned Revenues. On June 1 of the current year,...Ch. 13 - Unearned Revenues. GoSnow Inc. provides snow...Ch. 13 - Prob. 13.4BECh. 13 - Prob. 13.5BECh. 13 - Prob. 13.6BECh. 13 - Sales Taxes Payable. Kloth Fabric Store operates...Ch. 13 - Prob. 13.8BECh. 13 - Prob. 13.9BECh. 13 - Prob. 13.10BECh. 13 - Asset Retirement Obligation at Acquisition. On...Ch. 13 - Prob. 13.12BECh. 13 - Asset Retirement Obligation, Disposal. Buckner...Ch. 13 - Prob. 13.14BECh. 13 - Prob. 13.15BECh. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - Warranty Liability, Assurance-Type Warranty,...Ch. 13 - Prob. 13.19BECh. 13 - Prob. 13.20BECh. 13 - Trade Notes Payable. On November 1, Barcelona...Ch. 13 - Unearned Revenues. On May 1 of the current year,...Ch. 13 - Gift Cards. Diamond Depot sold 57,000 of gift...Ch. 13 - Sales Taxes Payable. Eaton Technology operates...Ch. 13 - Prob. 13.5ECh. 13 - Asset Retirement Obligation. On January 1,...Ch. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Accounting for Premiums. Supergreen Grocers, Inc....Ch. 13 - Prob. 13.13ECh. 13 - Payroll Taxes Payable, Pay Exceeds. Wage Base....Ch. 13 - Current Operating Liabilities. James Stores, Inc....Ch. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Payroll Taxes Payable. Jackson Corporation employs...Ch. 13 - Prob. 1JCCh. 13 - Prob. 2JCCh. 13 - Prob. 3JCCh. 13 - Financial Statement Analysis Case You are...Ch. 13 - Surfing the Standards Case 1: Environmental...Ch. 13 - Prob. 2SSCCh. 13 - Prob. 1BCC
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