Vroom Vacuums sells the Tornado vacuum cleaner. Each Tornado has a one-year warranty that covers any product defects. When customers purchase a Tornado, they also have the option to purchase an extended three-year warranty that covers any breakage or maintenance. The extended warranty sells for the same amount regardless of whether it is purchased at the same time as the Tornado or at some other time. How many performance obligations exist in the implied contract for the purchase of a vacuum cleaner? Number of performance obligations in the contract Identify the best description of each performance obligation from the following list. Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect. Delivery of vacuum cleaner ✔The one-year quality-assurance warranty ✔The option to purchase the three-year extended warranty ✔Purchase of vacuum cleaner

Vroom Vacuums sells the Tornado vacuum cleaner. Each Tornado has a one-year warranty that covers any product defects. When customers purchase a Tornado, they also have the option to purchase an extended three-year warranty that covers any breakage or maintenance. The extended warranty sells for the same amount regardless of whether it is purchased at the same time as the Tornado or at some other time. How many performance obligations exist in the implied contract for the purchase of a vacuum cleaner? Number of performance obligations in the contract Identify the best description of each performance obligation from the following list. Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect. Delivery of vacuum cleaner ✔The one-year quality-assurance warranty ✔The option to purchase the three-year extended warranty ✔Purchase of vacuum cleaner

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Vroom Vacuums sells the Tornado vacuum cleaner. Each Tornado has a one-year warranty that covers any product defects. When customers purchase a Tornado, they also have the option to purchase an extended three-year warranty that covers any breakage or maintenance. The extended warranty sells for the same amount regardless of whether it is purchased at the same time as the Tornado or at some other time.How many performance obligations exist in the implied contract for the purchase of a vacuum cleaner? Identify the best description of each performance obligation from the following list. (You may select more than one answer.) Delivery of vacuum cleaner The one-year quality-assurance warranty The option to purchase the three-year extended warranty Purchase of vacuum cleaner
Vroom Vacuums sells the Tornado vacuum cleaner. Each Tornado has a one-year warranty that covers any product defects. When customers purchase a Tornado, they also have the option to purchase an extended three-yearwarranty that covers any breakage or maintenance. The extended warranty sells for the same amount regardlessof whether it is purchased at the same time as the Tornado or at some other time. How many performance obligations exist in the implied contract for the purchase of a vacuum cleaner?
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
Cential Company sells appliances that includes an optional three-year warranty service for an additional fee. Service calls under the warranty are performed by an independent mechanic under a contract with Cential. Based on experience, warranty costs are estimated at P50 for each machine sold. When should Cential recognize these warranty costs? a. When the mechanic is paid b. Evenly over the life of the warranty c. When the service calls are performed d. When the machines are sold
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…
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…
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…
(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…
During 2020, Beautiful Company introduced a fully automatic washing machine with dryer. The sales price per unit that comes with warranty is P40,000. The company offers a three-year warranty against defects and provides service other than the agreed-upon specifications. In addition, the customers are given the option to purchase the warranty separately. If the customer opted not to buy the warranty, the washing machine with dryer is sold for P37,500. The following are the sales data (see image below).Beautiful estimates that of the total pesos spent for repairs in the warranty contracts, 20% is incurred evenly during the first warranty year, 30% evenly in the second warranty year and 50% evenly during the third warranty year. Cost of servicing the units during 2020 and 2021 were P150,000 and P300,000 respectively.How much is the Unearned Revenue from Warranty Contracts at December 31, 2021?
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. ) During the year ended 30 June 2014, Parent company guarantees borrowings of Subsidiary company which amounts to $1,000,000. At the time of the guarantee, Subsidiary’s’ financial position was sound. During the year ended 30 June 2015, the financial condition of Subsidiary company deteriorates and at 30 June 2015 Subsidiary…
MESA gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale MESA 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. At 31 December 2021, MESA appropriately recognized P50,000 warranty provision. MESA incurred and charged P140,000 against the warranty provision in 2022. P80,000 of this related to warranties for sales made in 2022. The increase during 2022 in the discounted amount recognized as a provision at 31 December 2022 arising from the passage of time is P3,000. At 31 December 2022, MESA, estimated that it would incur expenditures in 2023 to meet its warranty obligations at 31 December 2022, as follows: 5 per cent probability of P400,000 20 per cent probability of P200,000 50 per cent probability of P20,000 25 per cent…
Better Buy Ltd. sells notebook computers, that come with a 90-day manufacturer's warranty, as well as extended warranties. On July 1, 2021, Better Buy sold a notebook with a two-year extended warranty contract. The extended warranty coverage started on October 1", after the 90-day manufacturer's warranty on the notebook expired. The customer paid $1,500 cash for this special offer. The customer was not obliged to purchase the extended warranty with the notebook, so two performance obligations have been identified. The stand-alone selling price of the computer is $1,400 (cost to Better Buys Ltd. was $700). The stand-alone value of the two-year extended warranty is $240 if purchased and paid for today. Assume the costs to provide the warranty are incurred fairly evenly throughout the two-year period. The customer takes the computer home on July 1, 2021. Better Buys Ltd. has a December 31 year end and prepares financial statements annually. Required: (a) How much of the $1,500 revenue…