2) Over the past 4 years, Matador has estimated warranty expense based on 3.5% of sales. On May 1, 2022, after reviewing its most recent year end number for actual warranties paid, it decided to change this estimate to 4.75%. If Matador had used the 4.75% in the past, warranty expenses would be $150,000 higher in prior years. During fiscal 2022, Matador had earned sales revenues of $2,750,000 of which 20% were cash sales and 80% were credit sales. The bookkeeper calculated warranty expenses for 2022 using the 3.5%. Round answer to nearest whole dollar. Determine the adjustment to ICO. Matador has a corporate tax rate of 30%.
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- In 2025, Oriole Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon experience with other products, the estimated warranty costs as a percentage of sales revenue are as follows: First year of warranty. 3% Second year of warranty 5% Sales revenue and actual warranty expenditures for 2025 and 2026 are presented below: Sales revenue Actual warranty expenditures) 2025 $755000 42000 2026 $1051000 72000 What is the estimated warranty liability at the end of 2026? (assume the accrual method)Pesto Company started its business in selling printers with three-year warranty. It estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 3% will be repaired during the first year of warranty, 5% will be repaired during the second year of warranty and 7% will be repaired in the third year. The product warranty provides service other than agreed upon specification. In 2021 and 2022, the company was able to sell 10,000 units and 12,500 units, respectively at a total price of P7,000 per unit. The company also incurred actual repair costs of P3,500,000 and P9,500,000 in 2021 and 2022, respectively. The selling price of the warranty is P2,000 per unit. The printer is selling at P5,000 if without the warranty. Pesto Company should report unearned warranty income at the end of December 31, 2022 of? P10,625,000 P29,333,333 P21,666,667 P16,000,000Pesto Company started its business in selling printers with three-year warranty. It estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 3% will be repaired during the first year of warranty, 5% will be repaired during the second year of warranty and 7% will be repaired in the third year. The product warranty provides service other than agreed upon specification. In 2021 and 2022, the company was able to sell 10,000 units and 12,500 units, respectively at a total price of P7,000 per unit. The company also incurred actual repair costs of P3,500,000 and P9,500,000 in 2021 and 2022, respectively. The selling price of the warranty is P2,000 per unit. The printer is selling at P5,000 if without the warranty. Pesto Company should report unearned warranty income at the end of December 31, 2022 of? Group of answer choices P29,333,333 P21,666,667 P16,000,000 P10,625,000
- Use the information for the next four (4) questions. In 2020, Pluto Company started selling new computer that carried a 2-year warranty against defects. Based on the manufacturer's recommendations, the entity estimated warranty cost as a percentage of sales. The sales and warranty repairs are made evenly during the year. First year of warranty 3% Second year of warranty 9% Sales and actual warranty repairs are as follows: 2020 2021 Sales 7,500,000 10,500,000 Actual warranty repairs 150,000 375,000 What is the warranty expense for 2020? What is the warranty expense for 2021? What is the warranty liability on December 31, 2021 before adjustment? What is the warranty liability on December 31, 2021 after adjustment?The following selected transactions relate to contingencies of Classical Tool Makers, Incorporated, which began operations in July 2024. Classical's fiscal year ends on December 31. Financial statements are issued in April 2025. 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs are expected to approximate 5% of sales. Sales were $2.4 million (all credit) for 2024. Actual warranty expenditures were $47,100 and were recorded as warranty expense when incurred. 2. Although no customer accounts have been shown to be uncollectible, Classical estimates that 2% of credit sales will eventually prove uncollectible. 3. In December 2024, the state of Tennessee filed suit against Classical, seeking penalties for violations of clean air laws. On January 23, 2025, Classical reached a settlement with state authorities to pay $1.9 million in penalties. 4. Classical is the plaintiff in a $4.4 million lawsuit filed against a…ABC Corporation introduced a new line of products in 2023 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 3% of sales. In 2023, sales of the new products totaled $5,050,000 and actual warranty expenditures were $49,250. What is the amount of warranty expense ABC will record in 2023? 5,050,000 49,250 151,500 There is not enough information to answer this question.
- The following selected transactions relate to contingencies of Classical Tool Makers, Incorporated, which began operations in July 2024. Classical’s fiscal year ends on December 31. Financial statements are issued in April 2025. Classical's products carry a one-year warranty against manufacturer’s defects. Based on previous experience, warranty costs are expected to approximate 4% of sales. Sales were $2.5 million (all credit) for 2024. Actual warranty expenditures were $40,000 and were recorded as warranty expense when incurred. Although no customer accounts have been shown to be uncollectible, Classical estimates that 3% of credit sales will eventually prove uncollectible. In December 2024, the state of Tennessee filed suit against Classical, seeking penalties for violations of clean air laws. On January 23, 2025, Classical reached a settlement with state authorities to pay $2.0 million in penalties. Classical is the plaintiff in a $4.5 million lawsuit filed against a supplier. The…The following selected transactions relate to contingencies of Classical Tool Makers, Incorporated, which began operations in July 2024. Classical's fiscal year ends on December 31. Financial statements are issued in April 2025. 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 $3.6 million (all credit) for 2024. Actual warranty expenditures were $45,900 and were recorded as warranty expense when incurred. 2. Although no customer accounts have been shown to be uncollectible, Classical estimates that 1% of credit sales will eventually prove uncollectible. 3. In December 2024, the state of Tennessee filed suit against Classical, seeking penalties for violations of clean air laws. On January 23, 2025, Classical reached a settlement with state authorities to pay $3.1 million in penalties. 4. Classical is the plaintiff in a $5.6 million lawsuit filed against a…An entity started business in 2021. It sells printers with a three-year warranty. The entity estimated its warranty cost as percentage of peso sales. Based on the past experience, it is estimated that 3% will be repaired during the year of warranty, 5%will be repaired during the special year of warranty and 10% will be in the third year. In 2021 and 2022, the entity was able to sell 7,500 and 10,000 units, respectively at a selling price of P4,000 per unit. The entity also incurred repair cost of P800,000 and P2,400,000 in 2021 and 2022 respectively. Sales and repair occur evenly throughout the period What is the unadjusted warranty expense for 2022? What is the unadjusted warranty liability for December 31, 2022? What is the adjusted warranty liability after testing its adequacy? What is the adjusted warranty expense for 2022?
- At the beginning of the year, Laurier Inc. had a balance in its warranty liability account of $ 50000. During the year Laurier Inc. paid warranty costs of $ 62000. At the end of the year, Laurier Inc. estimated that its future warranty liability was $ 60000. How much is Laurier Inc.'s warranty expense for the year? Your Answer:In 2023, Ayayai Corp. began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to dollar sales are as follows: First year of warranty 2% Second year of warranty 5% Sales and actual warranty expenditures for 2023 and 2024 are presented below: 2023 2024 Sales Actual warranty expenditures O $74900 O $12020 $469000 $601000 O $51000 O $23900 17000 Ayayai uses the expense approach to account for warranties. What is the estimated warranty liability at the end of 2024? 34000Pharoah Company offers a five-year warranty on its products. Pharoah previously estimated warranty costs to be 3% of sales but in 2025 revised this estimate to 1% due to process and quality control improvements. Pharoah reported warranty costs of $80100 on $2670000 of sales in 2023 and $95100 on $3170000 in 2024 . Sales revenue for 2025 was $5170000. What is the adjustment to retained earingings in 2025?