Illustration - "expected An entity sells goods with a warranty under which customers are covered for the cost of repairs of any manufacturing defects that become apparent within 6 months after purchase. If minor defects are detected in all products sold, repair costs would be about P1,000,000. If major defects are detected in all products sold, repair costs of P5,000,000 would result. The entity's past experience and future expectations indicate that 75% of the goods sold will have no defects, 20% will have minor defects and 5% will have major defects. The expected value or cost of repairs is measured as follows: 75% sales 20% sales (20% x 1,000,000) 5% sales ( 5% x 5,000,000) Total expected value or cost of repairs None 200,000 250,000 450,000

Illustration - "expected An entity sells goods with a warranty under which customers are covered for the cost of repairs of any manufacturing defects that become apparent within 6 months after purchase. If minor defects are detected in all products sold, repair costs would be about P1,000,000. If major defects are detected in all products sold, repair costs of P5,000,000 would result. The entity's past experience and future expectations indicate that 75% of the goods sold will have no defects, 20% will have minor defects and 5% will have major defects. The expected value or cost of repairs is measured as follows: 75% sales 20% sales (20% x 1,000,000) 5% sales ( 5% x 5,000,000) Total expected value or cost of repairs None 200,000 250,000 450,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Pls answer this question with solutions. A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract of sale, the manufacturer undertakes to make good, by repair or replacement, manufacturing defects that become apparent within one year from the date of sale. On the basis of experience, it is probable (i.e., more likely than not) that there will be some claims under the warranties. Sales of ₱40 million were made evenly throughout 20X1. At December 31, 20x1 the expenditures for warranty repairs and replacements for the product sold in 20x1 are expected to be made 50% in 20x1 and 50% in 20x2. Assume for simplicity that all the 20x2 outflows of economic benefits related to the warranty repairs and replacements take place on June 30, 20x2. Experience indicates that 95% of products sold require no warranty repairs; 3% of products sold require minor repairs costing 10% of the sale price; and 2% of products sold require major…
A manufacturer gives warranties at the time of sale to purchasers of its product. Under the termsof the contract of sale, the manufacturer undertakes to make good, by repair or replacement,manufacturing defects that become apparent within one year from the date of sale. On the basisof experience, it is probable (i.e., more likely than not) that there will be some claims under thewarranties.Sales of ₱40 million were made evenly throughout 20X1. Midterm Examination At December 31, 20x1 the expenditures for warranty repairs and replacements for the product soldin 20x1 are expected to be made 50% in 20x1 and 50% in 20x2. Assume for simplicity that all the20x2 outflows of economic benefits related to the warranty repairs and replacements take place onJune 30, 20x2.Experience indicates that 95% of products sold require no warranty repairs; 3% of products soldrequire minor repairs costing 10% of the sale price; and 2% of products sold require major repairs orreplacement costing 90% of sale…
Problem 2 Erika Company operates lovaity program. The entity grants loyalty points for goods purchased. The loyalty points van be used by costumer in exchange for goods of the entity. The points have no expiry date. During 2021, the entity issued 50,000 award credits and expects that 80% of these award credits shall be redeerned. The Total Stand-alone selling price of the award credits granted is reliably measured at P1, 00,000 in 2021, the entity sold goods to costumers for a total consideration of P7, 000,000 based on stand-alone selling price. « Th i The award credits redeemed and the total award credits expected to be redeerned each year: Redeemed Expected to be Redeemed 2021 15,000 7,950 2,550 15.000 B0% 2022 85% 85% 90% 2023 2024 1. What amount should be reported as revenue points for 20217 A. 328, 125 B. 875,000 C. 700,000 D. 175,000 2. What amount should be reported as revenue frorn points for 2022? A. 472, 500 В. 4А, 375 C. 415, 625 D. 236, 250 3. What amount shauld be…
Erika Company operates a customer loyalty program. The entity grants loyalty points for goods purchased. The loyalty points can be used by the customers in exchange for goods of the entity. The points have no expiry date. During 2020, the entity issued 50,000 award credits and expects that 80% of these award credits shall be redeemed. The stand-alone selling price of the award credits granted is reliably measured at P1,000,000. In 2020, the entity sold goods to customers for a total consideration of P7,000,000 based on stand-alone selling price. The award credits redeemed and the total award credits expected to be redeemed each year are as follows: Redeemed Expected to be Redeemed 2020 15,000 80% 2021 7,950 85% 2022 2,550 85%…
Familiar Company operates a customer loyalty program. The entity grants loyalty points for goods purchased. The loyalty points can be used by the customers in exchange for goods of the entity. The points have no expiry date. During 2019, the entity issued 450,000 award credits and expects that 40% of these award credits shall be redeemed. The total stand-alone selling price of the award credits granted is measured reliably at P9,000,000. In 2019, the entity sold goods to customers for a total consideration of P36,000,0000 based on a stand-alone selling price. The award credits redeemed and the total award credits expected to be redeemed each year are as follows: Redeemed Expected to be redeemed 2019 135,000 40% 2020 67,500 45% What is the revenue from points for 2019? P1,350,000 P3,600,000 P1,080,000 P3,375,000 What is the revenue from points for 2020?…
2. During 2020, Joaquin Company introduced a new line of machines that carry a two-yearwarranty against manufacturer’s defects. Based on industry experience, the estimatedwarranty cost percentages related to peso sales are as follows:Year of sale 1%Year after sale 6%Sales and actual warranty expenditures for 2020 and 2021 were as follows:Year Sales Actual warranty expenditures2020 P1,000,000 P54,0002021 1,400,000 89,000a. How much is the warranty expense to be recognized in 2020 and 2021,respectively?b. What is the estimated warranty liability as of December 31, 2020 and 2021,respectively?
Obra Ltd is your client. It has adopted IFRS as the financial reporting framework and has asked you to assist in dealing with the following issues. On I January 2014 Obra Ltd acquired a machine under the following terms. Manufacturer's base price GHS1,050,000 Trade discount (applying to base price only) 20% Early settlement discount taken (on the payable amount of the base cost only) 5% Freight charges GHS 30,000 Electrical installation cost GHS 28,000 Staff training in use of machine GHS 40,000 Pre-production testing GHS 22,000 Purchase of a three-year maintenance contract GHS60,000 Estimated residual value GHS 20,000 Estimated life in machine hours 6,000 hours Hours used -year ended 31 December 2014 - 1,200 hours - year ended 31 December 2015 1,800 hours - year ended 31 December 2016 (see below) 850 hours On I January 2016 Obra Ltd decided to upgrade the machine by adding new…
Erika Company operates a customer loyalty program. The entity grants loyalty points for goods purchased. The loyalty points can be used by the customers in exchange for goods of the entity. The points have no expiry date. During 2020, the entity issued 50,000 award credits and expects that 80% of these award credits shall be redeemed. The fair value of the award credits granted is reliably measured at P2,000,000. In 2020, the entity sold goods to customers for a total consideration of P9,000,000 based on stand-alone selling price. The award credits redeemed and the total award credits expected to be redeemed each year are as follows: Redeemed Expected to be Redeemed 2020 15,000 80% 2021 7,950 85% 2022 2,550 85% 2023 15,000 90% Required: Prepare journal entries from 2020 to 2023.
Cinnamon Company operates a customer loyalty program. The entity grants loyalty points for goods purchased. The loyalty points can be used by the customers in exchange for goods of the entity. The points have no expiry date. During 2019, the entity issued 150,000 award credits and expects that 80% of these award credits shall be redeemed. The total stand-alone selling price of the award credits granted is measured reliably at P3,000,000. In 2019, the entity sold goods to customers for a total consideration of P12,000,0000 based on a standalone selling price. The award credits redeemed and the total award credits expected to be redeemed each year are as follows: Redeemed Expected to be redeemed 2019 45,000 80% 2020 22,500 90% What is the revenue from points for 2019? What is the revenue from points for 2020?
(a) A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale, the manufacturer undertakes to make good by repair or replacement, manufacturing defects that become apparent within three years from the date of sale. On past experience, it is probable that there will be some claims under the warranties. Past experience suggests that 75% of the goods sold will have no defects, 20% will have minor defects and 5% will have major defects. If minor defects were detected in all products sold, the cost of repairs would be $1,000,000; if major defects were detected in all products sold, the cost would be $4,000,000.prepare necessary journal entry since a provision is recognized
(a) A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale, the manufacturer undertakes to make good by repair or replacement, manufacturing defects that become apparent within three years from the date of sale. On past experience, it is probable that there will be some claims under the warranties. Past experience suggests that 75% of the goods sold will have no defects, 20% will have minor defects and 5% will have major defects. If minor defects were detected in all products sold, the cost of repairs would be $1,000,000; if major defects were detected in all products sold, the cost would be $4,000,000. Requirements: Do you think a provision should be recognized? Explain your decision
a) A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale, the manufacturer undertakes to make good by repair or replacement, manufacturing defects that become apparent within three years from the date of sale. On past experience, it is probable that there will be some claims under the warranties. Past experience suggests that 75% of the goods sold will have no defects, 20% will have minor defects and 5% will have major defects. If minor defects were detected in all products sold, the cost of repairs would be $1,000,000; if major defects were detected in all products sold, the cost would be $4,000,000. Requirements: 1. Do you think a provision should be recognized? Explain your decision 2. If a provision should be recognized, prepare the necessary journal entry to record the liability. (b) During the year ended 30 June 2014, Parent company guarantees borrowings of Subsidiary company which amounts to $1,000,000. At…