Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Textbook Question
Chapter 8, Problem 71E
Warranties
Ed’s Athletics sells bicycles and other sports and athletic equipment. Sales and expected warranty claims for the year are as follows:
Required:
1. Prepare the entry to record warranty expense for Ed’s for the year.
2. CONCEPTUAL CONNECTION Why does Ed’s have to record a liability for future warranty claims?
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A consumer goods company provides warranties on its products. The company has been in business for decades and has a good
history of warranty claim data. At what point should the company record warranty expense?
O When the customer mails the item to the company for repair.
O At the time warranty work is performed.
O In the period of the sale.
O When the customer receives the repaired item.
Warranty expenditures arise when a business sells items and then calculates the number of units and the cost per unit for possible repairs and replacements throughout the warranty term.True \sFalse
The expense for warranty costs is recorded in the period ________.
A.
when cash is paid to repair or replace the product
B.
when the product is sold
C.
when the product is repaired or replaced
D.
when cash is collected from the sale of the product
Chapter 8 Solutions
Cornerstones of Financial Accounting
Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ
Ch. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Refer to the information for Kinsella Seed above....Ch. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQCh. 8 - Prob. 9MCQCh. 8 - When a credit is made to federal income taxes...Ch. 8 - Prob. 11MCQCh. 8 - Prob. 12MCQCh. 8 - Prob. 13MCQCh. 8 - Prob. 14MCQCh. 8 - Prob. 15MCQCh. 8 - Prob. 16MCQCh. 8 - Prob. 17MCQCh. 8 - Which of the following transactions would cause...Ch. 8 - Issuing Notes Payable On June 30, Carmean Inc....Ch. 8 - Notes Payable Rogers Machinery Company borrowed...Ch. 8 - Prob. 21CECh. 8 - Accrued Interest On March 1, the Garner...Ch. 8 - Prob. 23CECh. 8 - Prob. 24CECh. 8 - Sales Tax Cobb Baseball Bats sold 45 bats for $50...Ch. 8 - Payroll Taxes Hernandez Builders has a gross...Ch. 8 - Prob. 27CECh. 8 - Prob. 28CECh. 8 - Unearned Sales Revenue Brand Landscaping offers a...Ch. 8 - Prob. 30CECh. 8 - Prob. 31CECh. 8 - Prob. 32CECh. 8 - Liquidity Ratios NWAs financial statements contain...Ch. 8 - Prob. 34CECh. 8 - Accounts Payable On May 18, Stanton Electronics...Ch. 8 - Accounts and Notes Payable On February 15, Barbour...Ch. 8 - Issuing Notes Payable On September 30, Bello...Ch. 8 - Notes Payable Renchen Company, which manufactures...Ch. 8 - Accrued Interest On July 1, Brimley Company issued...Ch. 8 - Accrued Interest On May 1, the Garnett Corporation...Ch. 8 - Accrued Property Taxes Annual property taxes...Ch. 8 - Accrued Income Taxes Nolan Inc. had taxable income...Ch. 8 - Prob. 43BECh. 8 - Accrued Wages A company employs a part-time staff...Ch. 8 - Prob. 45BECh. 8 - Prob. 46BECh. 8 - Prob. 47BECh. 8 - Prob. 48BECh. 8 - Payroll Taxes Sids Grocery Store has 100 employees...Ch. 8 - Prob. 50BECh. 8 - Payroll Taxes Its the Tooth Dental works to...Ch. 8 - Unearned Sales Revenue Curtiss Carpet Cleaning...Ch. 8 - Unearned Rent Revenue Mannion Property Management...Ch. 8 - Contingent Liabilities Many companies provide...Ch. 8 - Prob. 55BECh. 8 - Prob. 56BECh. 8 - Prob. 57BECh. 8 - Liquidity Ratios JRLs financial statements contain...Ch. 8 - Prob. 59BECh. 8 - Prob. 60ECh. 8 - Recording Various Liabilities Glenview Hardware...Ch. 8 - Recording Various Liabilities Plymouth Electronics...Ch. 8 - Reporting Liabilities Morton Electronics had the...Ch. 8 - Accounts Payable Sleek Ride, a company providing...Ch. 8 - Accrued Liabilities Charger Inc. had the following...Ch. 8 - Accrued Liabilities Thornwood Tile had the...Ch. 8 - Prob. 67ECh. 8 - Payroll Accounting and Discussion of Labor Costs...Ch. 8 - Unearned Revenue Jennifers Landscaping Services...Ch. 8 - Prob. 70ECh. 8 - Warranties Eds Athletics sells bicycles and other...Ch. 8 - Ratio Analysis Intel Corporation provided the...Ch. 8 - Payable Transactions Richmond Company engaged in...Ch. 8 - Payroll Accounting Jet Enterprises has the...Ch. 8 - Note Payable and Accrued Interest Fairbome Company...Ch. 8 - Prob. 76APSACh. 8 - Prob. 77APSACh. 8 - Prob. 78APSACh. 8 - Prob. 79APSACh. 8 - Ratio Analysis Consider the following information...Ch. 8 - Payable Transactions Daniels Company engaged in...Ch. 8 - Payroll Accounting McLaughlin Manufacturing has...Ch. 8 - Note Payable and Accrued Interest Ellsworth...Ch. 8 - Prob. 76BPSBCh. 8 - Prob. 77BPSBCh. 8 - Prob. 78BPSBCh. 8 - Prob. 79BPSBCh. 8 - Ratio Analysis Consider the following information...Ch. 8 - Prob. 81.1CCh. 8 - Prob. 81.2CCh. 8 - Prob. 81.3CCh. 8 - Prob. 82.1CCh. 8 - Prob. 82.2CCh. 8 - Prob. 82.3CCh. 8 - Prob. 83.1CCh. 8 - Prob. 83.2CCh. 8 - Prob. 83.3CCh. 8 - Prob. 83.4CCh. 8 - Prob. 83.5CCh. 8 - Prob. 83.6CCh. 8 - Prob. 83.7CCh. 8 - Prob. 83.8CCh. 8 - Prob. 83.9CCh. 8 - Prob. 84.1CCh. 8 - Prob. 84.2CCh. 8 - Prob. 84.3CCh. 8 - Prob. 84.4CCh. 8 - Prob. 84.5CCh. 8 - Comparative Analysis: Under Armour, Inc., versus...Ch. 8 - Prob. 84.7CCh. 8 - Prob. 84.8CCh. 8 - Prob. 85.1CCh. 8 - Prob. 85.2CCh. 8 - Prob. 85.3C
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- When auditing product warranty liabilities, when should the warranty cost be recognized? Question 1 options: At the time the warranty work is performed At the time of purchase Evenly, annually over the life of the product In the last year of the product's lifearrow_forwardContingent Liabilities Many companies provide warranties with their products. Such warranties typically guarantee the repair or replacement of defective goods for some specified period of time following the sale. Required: CONCEPTUAL CONNECTION Why do most warranties require companies to make a journal entry to record a liability for future warranty costs?arrow_forwardWhich of the following is an account used in applying the Sales Warranty Approach, but not the Expense Warranty Approach? Select one: O a Estimated liability under warranties Ob. Warranty Expense Oc Unearned Warranty Revenue O d. Prepaid Warranty Expensearrow_forward
- The account "Warranty Liability": Multiple Choice a)has a year-end credit balance equal to the cost of warranty repairs made during the year. b)is closed at the end of the year. c)is credited each time a warranty repair is made. d)is adjusted at the end of the year.arrow_forward1. Determine the estimated warranty liability on December 31, 2022.2. Analyze the estimated warranty liability account to ascertain if adjustment is necessary. The sales and warranty repairs are made evenly during the year.arrow_forwardQuestions: 1. What amount of warranty expense would be charge against 2021 revenue? 2. What amount of warranty liability would appear in the December 31, 2021 statement of financial position?arrow_forward
- All of the following statements related to recording warranty expense are true except: Multiple Choice Warranty expense should be recorded in the period when the warranty service is performed. Warranty costs are probable and the amount can be estimated. The seller reports a warranty obligation as a liability. Estimated warranty expense is recorded when revenue from the sale of the product or service is reported. Recording estimated warranty expense requires a debit to Warranty Expense.arrow_forwardOn 9/1, the Knight's Stop issues a new part to a customer to replace a defective part the customer purchased the previous year. The new part was issued under the two-year warranty offered on all parts sold by company. On 9/1, Knight's Stop would debit which account for the journal entry? O Accounts Receivable O Inventory O Warranty Payable O Accounts Payable O Warranty Expense O. Cash O Current Portion Long-term Debt ASUS f4 f5 E3 f6 f7 f9 f8 团 f10 f11 & 4. 9. T. Y U F G H 08 因 96 Rarrow_forwardOn 9/1, the Knight's Stop issues a new part to a customer to replace a defective part the customer purchased the previous year. The new part was issued under the two-year warranty offered on all parts sold by company. On 9/1, Knight's Stop would debit which account for the journal entry? O Accounts Receivable O Inventory O Warranty Payable O Accounts Payable O Warranty Expense O Cash O Current Portion Long-term Debt ASUS f4 f5 E3 f6 f7 f8 f9 f11 f10 团 & 4 5 6 7 8. Y. U 因 图 %24arrow_forward
- Assurance-Type Warranty Clean-All Inc. sells washing machines with a 3-year assurance-type warranty. In the past, Clean-All has found that in the year after sale, warranty costs have been 3% of sales; in the second year after sale, 5% of sales; and in the third year after sale, 7% of sales. The following data are also available: Required: 1. Prepare the journal entries for the preceding transactions for 20192021. Closing entries are not required. 2. What amount would Clean-All report as a liability on its December 31, 2021, balance sheet, assuming the liability had a balance of 88,200 on December 31, 2018? 3. Next Level How would the failure to recognize a contingent liability affect the financial statements?arrow_forwardPrepare 2020 entries for Carla assuming that the warranties are not an integral part of the sale (a service-type warranty). Assume that of the sales total, $53,000 relates to sales of warranty contracts.Warranty costs incurred in 2020 were $22,000. Estimate revenues to be recognized on a straight-line basis. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round intermediate calculations to 5 decimal places, e.g. 1.54657 answers to O decimal places, e.g. 5,125. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Creditarrow_forwardWarranties Kim's Athletics sells bicycles and other sports and athletic equipment. Sales and expected warranty claims for the year are as follows: Expected Warranty Claims Item Unit Sales for Warranty Period Cost per Claim Mountain bikes 1,100 Racing bik 600 1 claim per 100 sold 10 claims per 100 sold $56 29 Snowboards 2,400 4 claims per 100 sold 34 Required: 1. Prepare the entry to record warranty expense for Kim's for the year. If an amount box does not require an entry, leave it blank. Dec. 31 (Record warranty expense) 38 2. Conceptual Connection: Why does Kim's have to record a liability for future warranty claims? Warranties are are Therefore, companies must record and a corresponding if such contingent amountsarrow_forward
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