Raya Company offers a 3-year warranty on its products. Raya estimated warranty costs to be 5% of sales. Due to a technological advance in production at the beginning of 2021, Raya now believes 3% of sales to be a better estimate of warranty costs. Warranty costs of P500,000 and P1,000,000 were reported in 2019 and 2020, respectively. Sales for 2021 amounted to P25,000,000. What amount should be shown in the 2021 financial statements as warranty expense? Group of answer choices A. 750,000 B. 1,250,000 C. 2,000,000 D. 500,000
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- 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.In 2020, KD Corporation 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 peso sales are as follows:First year of warranty 2%Second year of warranty 5%Sales and actual warranty expenditures for 2020 and 2021 are presented below: 2020 2021Sales P900,000 P1,200,000Actual warranty expenditures 30,000 60,000What is the estimated warranty liability at the end of 2021?a. P87,000 b. P24,000 c. P57,000 d. P147,000Lindy Appliance begins operations in 2021 and offers a one-year warranty on all products sold. Total appliance sales in 2021 are $1,600,000, and Lindy estimates future warranty costs in 2022 to be 2% of current sales. Actual warranty costs in 2022 are $25,000. Also in 2022, Lindy has additional sales of $2,400,000 and revises its estimate of warranty costs associated with sales in 2022 to be 1.5%. What is the balance in Warranty Liability at the end of 2021 and 2022 and the contingent liability for warranties for the year ending December 31, 2022?
- 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? 34000Lindy Appliance begins operations in 2021 and offers a one-year warranty on all products sold. Total appliance sales in 2021 are $1,600,000, and Lindy estimates future warranty costs in 2022 to be 2% of current sales. Actual warranty costs in 2022 are $25,000. Also in 2022, Lindy has additional sales of $2,400,000 and revises its estimate of warranty costs associated with sales in 2022 to be 1.5%.Required:1. Record the adjusting entry for estimated warranty costs at the end of 2021.2. Record the summary entry for actual warranty expenditures in 2022, assuming all costs were paid in cash.3. Record the adjusting entry for estimated warranty costs at the end of 2022.4. What is the balance in Warranty Liability at the end of 2021 and 2022?During 2024, Foxfire Company introduced a new line of machines that carry a three-year warranty against defects. Based on experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales were P1,200,000, P3,000,000 and P4,200,000 for 2024, 2025, and 2026, respectively. Actual warranty expenditures were P18,000, P90,000 and P270,000 for 2024, 2025 and 2026, respectively. What amount should be reported as warranty liability on December 31, 2026?
- In 2019, Shiftry Corporation 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 peso sales are as follows: First year of warranty 2% Second year of warranty 5% Sales and actual expenditures for 2019 and 2020 are presented below: 2019 2020 Sales 450,000 600,000 Actual warranty expenditures 15,000 30,000 What is the estimated warranty liability at the end of 2020?YellowCard ASA manufactures accessories for iPods, iPhones, and iPads. It had the following selected transactions during 2019. (For any part of this problem requiring an interest or discount rate, use 10%.) 1. YellowCard provides a 2-year warranty on the quality of its docking stations, which it began selling in 2019. YellowCard estimates that €45,000 will be spent in the future to warranties related to 2019 sales. During 2019, YellowCard spent €6,000 warranty claims. 2. YellowCard has a 1 year €200,000 loan outstanding from UBS. The loan is set to mature on February 28, 2020. YellowCard makes all of its quarterly interest payments (i.e. interest is due on the last days of each February, May, August, and November). For several years, UBS has agreed to extend the loan, as long as the firm maintains an acid-test ratio of at least 1.25 (Hint: the loan has always been extended and refinanced throughout years before 2019). On December 10, 2019, UBS provided YellowCard acommitment letter…In 2019, Caramel Corporation 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 peso sales are as follows: First year of warranty 5% Second year of warranty 9% Sales and actual warranty expenditures for 2019 and 2020 are presented below: 2019 2020 Sales P3,000,000 P4,000,000 Actual warranty expenditures 100,000 250,000 Using the accrual method, what amount should Caramel report as a liability…
- Duong-Burnett Products introduced a new line of commercial sprinklers in 2023 that carry a one-year warranty against manufacturer’s defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 2% of sales. Sales of the sprinklers in 2023 were $3,400,000. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product: General Journal Debit Credit Accrued liability and expense Warranty expense (2% × $3,400,000) 68,000 Warranty liability 68,000 Actual expenditures (summary entry) Warranty liability 31,280 Cash (or salaries payable, parts and supplies, etc.) 31,280 In late 2024, the company's claims experience was evaluated and it was determined that claims were far more than expected—3% of sales…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)YellowCard ASA manufactures accessories for iPods, iPhones, and iPads. It had the following selected transactions during calendar 2019. (For any part of this problem requiring an interest or discount rate, use 10%.) 1. YellowCard provides a 2-year warranty on its docking stations, which it began selling in 2019. YellowCard estimates that €45,000 will be spent in the future to service warranties related to 2019 sales. During 2019, YellowCard spent €6,000 servicing warranty claims. 2. YellowCard has a 1-year €200,000 loan outstanding from UBS. The loan is set to mature on February 28, 2020. For several years, UBS has agreed to extend the loan, as long as YellowCard makes all of its quarterly interest payments (interest is due on the last days of each February, May, August, and November) and maintains an acid-test ratio (also called quick ratio) of at least 1.25. On December 10, 2019, UBS provided YellowCard a commitment letter indicating that UBS will extend the loan another 12 months,…