Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Chapter 6, Problem 27AP
a.
To determine
Determine the amount of accrued expenses that can be deducted in 2019 and 2020, if HS Corporation does not accepts the recurring item exception as its accounting for service calls.
b.
To determine
Determine the amount of accrued expenses that can be deducted in 2019 and 2020, if HS Corporation accepts the recurring item exception as its accounting for service calls.
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FORD, INC., a dealer of household appliances, sells washing machines at an average price of P8,100. The company also offers to each customer a separate 3-year warranty contract for P810 that requires the company to provide periodic maintenance services and to replace defective parts. During 2019, FORD sold 300 washing machines and 270 warranty contracts for cash. The company estimates that the warranty costs are P180 for parts and P360 for labor.
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Assume sales occurred on December 31, 2019. FORDS’s policy is to recognize income from the warranties on a straight-line basis. In 2020, FORD incurred actual costs relative to 2019 warranty sales of P18,000 for parts and P36,000 for labor.
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What liability relative to the 2019 warranties would appear on the December 31, 2020, statement of financial position and how would it be classified?
                        Current            Noncurrent
Group of answer choices
P145,800 P 0
P72,900 P145,800
P72,900 P72,900
P145,800 P72,900
Waterway Company sells televisions at an average price of $ 934 and also offers to each customer a separate 3-year warranty
contract for $ 87 that requires the company to perform periodic services and to replace defective parts. During 2020, the company
sold 294 televisions and 214 warranty contracts for cash. It estimates the 3-year warranty costs as $21 for pa
and accounts for warranties separately. Assume sales occurred on December 31.2020, and
parts and $41 for labor,
straight-line recognition of warranty
revenues ocurs.
Part 1
Record any necessary journal entries in 2020. (f no entry is required, select "No Entry" for the account titles and enter O for the
amounts. Credit account tities are automatically indented when amount is entered. Do not indent manually)
Account Titles and Explanation
Debit
Credit
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Part 2
What liability relative to these transactions would appear on the December 31, 2020,…
During 2020, 1,000 units were sold at P9,000 each.
that requires the entity to replace defective parts and
Sony Company sells stereos under a 2-year warranty contract
provide free labor on all repairs.
hat requires the entity to replace defective parts and
During 2020, 1,000 units were sold at P9,000 each.
In 2021, the entity sold an additional 900 units at P9,250
each.
Sales occurred on the last day of the year for both 2020 and
2021.
Based on past experience, the estimated 2-year warranty
costs are P200 for parts and P250 for labor per unit.
It is also estimated that 40% of the warranty expenditures
will occur in the first year and 60% in the second year.
Actual warranty expenditures were:
2021
2022
Stereos sold in 2020
Stereos sold in 2021
180,000
280,000
190,000
Required:
1. Prepare journal entries for 2020, 2021 and 2022.
2. Analyze the estimated warranty liability to prove the
reasonable accuracy of the balance on December 31, 2022.
3. Prepare the adjustment of the estimated…
Chapter 6 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 6 - Prob. 1QPDCh. 6 - Prob. 2QPDCh. 6 - Prob. 3QPDCh. 6 - Prob. 4QPDCh. 6 - For many years, Mr. K, the president of KJ Inc.,...Ch. 6 - Prob. 6QPDCh. 6 - Prob. 7QPDCh. 6 - Firm NB, which uses the cash method of accounting,...Ch. 6 - Prob. 9QPDCh. 6 - Prob. 10QPD
Ch. 6 - Prob. 11QPDCh. 6 - Firms generally prefer to engage in transactions...Ch. 6 - Describe the contrasting treatment of prepaid...Ch. 6 - Net operating losses can be carried forward...Ch. 6 - Nello Company owed 23,400 overdue rent to its...Ch. 6 - For each of the following businesses, indicate the...Ch. 6 - Assuming a 21 percent marginal tax rate, compute...Ch. 6 - Prob. 4APCh. 6 - FruAgro Company has average annual gross receipts...Ch. 6 - Prob. 6APCh. 6 - Firm F is a cash basis legal firm. In 2018, it...Ch. 6 - Prob. 8APCh. 6 - Prob. 9APCh. 6 - Prob. 10APCh. 6 - Brillo Company uses the calendar year and the cash...Ch. 6 - NC Company, a retail hardware store, began...Ch. 6 - Prob. 13APCh. 6 - Warren Company is a calendar year, cash basis...Ch. 6 - Prob. 15APCh. 6 - Wahoo Inc., a calendar year taxpayer, leases...Ch. 6 - Prob. 17APCh. 6 - Using a 21 percent rate, compute the deferred tax...Ch. 6 - Prob. 19APCh. 6 - Prob. 20APCh. 6 - Prob. 21APCh. 6 - Prob. 22APCh. 6 - Prob. 23APCh. 6 - Prob. 24APCh. 6 - Prob. 25APCh. 6 - Prob. 26APCh. 6 - Prob. 27APCh. 6 - BZD, a calendar year corporation, made the...Ch. 6 - Prob. 29APCh. 6 - Prob. 30APCh. 6 - Prob. 31APCh. 6 - Prob. 32APCh. 6 - Prob. 33APCh. 6 - GK Company, a calendar year accrual basis...Ch. 6 - Prob. 35APCh. 6 - Prob. 36APCh. 6 - TRW Inc. began business in 2019 and incurred net...Ch. 6 - Prob. 38APCh. 6 - Prob. 39APCh. 6 - Margaret, a married taxpayer filing a joint...Ch. 6 - Prob. 41APCh. 6 - Prob. 1IRPCh. 6 - Corporation DS owns assets worth 550,000 and has...Ch. 6 - Two years ago, a professional theater company paid...Ch. 6 - Prob. 4IRPCh. 6 - Prob. 5IRPCh. 6 - Prob. 6IRPCh. 6 - Every December, Maxo Inc., an accrual basis,...Ch. 6 - Prob. 8IRPCh. 6 - Prob. 9IRPCh. 6 - Corporation WJ began business in 2019 and elected...Ch. 6 - Prob. 11IRPCh. 6 - Bontaine Publications, an accrual basis, calendar...Ch. 6 - Prob. 2RPCh. 6 - Prob. 3RPCh. 6 - Prob. 4RPCh. 6 - Company Y began business in February 2019. By the...Ch. 6 - Prob. 2TPC
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