Chapter 9, Problem 7AE

a.

To determine

Show the effect of the given transaction on the financial statements using a horizontal statements model and also indicate whether the item is an operating activity, financing activity or investing activity.

b.

To determine

Prepare journal entry to record the warranty expense for the period.

c.

To determine

Prepare journal entry to record the actual repair cost.

d.

To determine

Explain the reason for estimating warranty expenses and recording the expenses before the repairs are actually made by the company.