Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,100 and $900

Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,100 and $900

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 10RE

See similar textbooks

Similar questions

Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,100 and $900, respectively. The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a credit to Unearned Warranty Revenue, $900. debit to Warranty Liability, $350. debit to Warranty Expense, $900. credit to Warranty Liability, $900.
Sandhill Inc. manufactures and sells computers that include an assurance-type warranty for 90 days. Sandhill offers an optional extended coverage plan under which it will repair or replace any defective part for three years from the expiration of the assurance- type warranty. Because the optional extended coverage plan is sold separately. Sandhill determines that the three years of the extended coverage represent a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,860 on October 1, 2023. Sandhill determines that the stand-alone selling price of each is $3,250 and $610, respectively. Further, Sandhill estimates, based on historical experience, that it will incur $240 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,410. (b) Prepare the journal entry (or entries) to record the cash sale of the computer, cost of goods sold, and…
Crane Inc. manufactures and sells computers that include an assurance-type warranty for 90 days. Crane offers an optional extended coverage plan under which it will repair or replace any defective part for three years from the expiration of the assurance-type warranty. Because the optional extended coverage plan is sold separately, Crane determines that the three years of the extended coverage represent a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,760 on October 1, 2023. Crane determines that the stand-alone selling price of each is $3,000 and $760, respectively. Further, Crane estimates, based on historical experience, that it will incur $220 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,350. (b) Prepare the journal entry (or entries) to record the cash sale of the computer, cost of goods sold, and liabilities related…
Techtronics, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Techtronics also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,300 and $900, respectively. The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a A) debit to Warranty Expense, $900. B) debit to Warranty Liability, $350 C) credit to Warranty Liability, $900 D) credit to Unearned Warranty Revenue, $900
Oriole Inc. manufactures and sells computers that include an assurance-type warranty for the first 90 days. Oriole offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance-type warranty. Because the optional extended coverage plan is sold separately, Oriole determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,830 on October 1, 2017, and Oriole determines the standalone selling price of each is $3,420 and $410, respectively. Further, Oriole estimates, based on historical experience, it will incur $190 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,440. Assume that the $190 in costs to repair defects in the computers occurred on October 25, 2017. (a) Prepare the journal entry(ies) to…
(Warranties) Celic Inc. manufactures and sells computers that include an assurance-type warranty for the first 90 days. Celic offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance-type warranty. Because the optional extended coverage plan is sold separately, Celic determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,600 on October 1, 2017, and Celic determines the standalone selling price of each is $3,200 and $400, respectively. Further, Celic estimates, based on historical experience, it will incur $200 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,440. Assume that the $200 in costs to repair defects in the computers occurred on October 25, 2017.Instructions(a) Prepare the…
New Age Computers manufactures and sells pagers and radio paging systems which include a 180-day assurance warranty on product defects. The company estimates the value of the 180-day warranty to be $3,000. New Age also sells an extended warranty which provides an additional two years of protection. On May 10, the company sold a paging system for $4,500 with an extended warranty for another $1,400. The journal entry to record this transaction would be: OA. B. OD. Cash Sales revenue Unearned warranty revenue Cash Accounts receivable Sales revenue Service revenue Cash Sales revenue Cash Sales revenue Unearned warranty revenue Debit 5,900 Debit 4,500 1,400 Debit 8,900 Debit 8,900 Credit 4,500 1,400 Credit 4,500 1,400 Credit 8,900 Credit 7,500 1,400
Ace Appliances Inc. offers a 12-month warranty on all its appliances. AceAppliances estimates that one appliance out of each 1000 sold will require warranty service andthat the average cost per warranty claim is $300. Ace sold 30,000 appliances during 2020. Theestimated warranty liability at the beginning of the year was $ 4,500. Claims of $7,000 wereactually paid during the year to honour warranties. Ace Appliances has a December 31 year-end.Required:1. Calculate the estimated warranty expense for Ace Appliances for 2020.___________________2. Calculate the balance of the Estimated Warranty Liability account at December 31, 2020
Carla Vista Resellers Ltd. (CVRL) sells gently used and refurbished appliances. The company provides a three-month warranty that is included in the cost of the appliance. Claims under the warranties vary from replacing defective parts to providing customers with new appliances if repairs cannot be made. During 2024, the estimated cost related to the three-month warranties was $36,480, of which $24,000 had been incurred before year end ($18,240 on replacement appliances and $5,760 for parts). For an additional charge of $144, CVRL also offers extended warranty coverage for three years on its refurbished appliances. This amount is expected to cover the costs associated with the extended warranties. During 2024, CVRL sold 480 three-year warranty plans. The costs incurred during the year for repairs and replacements under these plans amounted to $14,400. Based on experience, the company estimates that its total warranty costs over the three-year coverage period will be $43,200, which it…
Ace Appliances Inc. offers a 12-month warranty on all its appliances. AceAppliances estimates that one appliance out of each 1000 sold will require warranty service and that the average cost per warranty claim is $300. Ace sold 30,000 appliances during 2020. The estimated warranty liability at the beginning of the year was $ 4,500. Claims of $7,000 were actually paid during the year to honour warranties. Ace Appliances has a December 31 year-end. 1. Calculate the estimated warranty expense for Ace Appliances for 2020 2. Calculate the balance of the Estimated Warranty Liability account at December 31, 2020.
Creative Computing sells a laptop computer called the Creative Package to Professor Smith with an extended warranty for $780. The $780 price of a Creative Package includes the following: One laptop Computer A one year basic assurance warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to one year. An agreement that Professor Smith will pay an additional $75 to purchase an extended 1 year warranty. How many performance obligations are included in this sale of the Creative Package? Question 13 options: a) 1 b) 2 c) 3 d) 4
Consumer Corp. sells dishwashers and washing machines that come with a two-year unlimited warranty on parts and labour for repairs. The warranty is intended to assure customers that the appliances will operate as advertised. The warranty is expected to cost 4% of sales in the first year and 6% of sales in the second year, for a total of 10%. The provision for warranty has a credit balance of $161,000 at the beginning of 20X5. The following events and decisions relate to the warranty: 20X5 Sales revenue of $4,750,000 was generated from products covered by the warranty. Both the sale and the warranty provision must be recorded. 20X5 Warranty work consumed parts inventory with a cost of $8,500, and labour of $35,000. 20X6 Sales revenue from products covered by the warranty were $6,750,000. Both the sale and the warranty provision must be recorded. 20X6 Sales revenue of $6,750,000 was generated from products covered by the warranty. Warranty work…