Anderson Company sells appliances, all for cash. All acquisitions of appliances during a year are debited to the Merchandise Inventory account. The company provides warranties on all its products, guaranteeing to make repairs within 1 year of the date of sale as required for any of its appliances that break down. The company has many years of experience with its products and warranties.

The schedule shown in Exhibit 10.8 contains trial balances for the Anderson Company at the ends of 1979 and 1980. The trial balances for the end of 1979 are the Adjusted Preclosing Trial Balance (after all adjusting entries have been properly made) and the final Postclosing Trial Balance. The trial balance shown for the end of 1980 is taken before any adjusting entries of any kind, although entries have been made to the Estimated Liability for Warranty Repairs account during the year 1980 as repairs have been made. Anderson Company closes its books once each year.

At the end of 1980, the management of Anderson Company analyzes the appliances sold within the preceding 12 months. All appliances in the hands of customers that are still covered by warranty are classified as follows: those sold on or before June 30 (more than 6 months old), those sold after June 30, but on or before November 30 (more than 1 month, but less than 6 months old), and those sold on or after December 1. One-half of one percent of the appliances sold more than 6 months ago are estimated to require repair, 5 percent of the appliances sold 1 to 6 months before the end of the year are estimated to require repair, and 8 percent of the appliances sold within the last month are assumed to require repair. From this analysis, management estimated that \(\$ 5.000\) of repairs still would have to be made in 1981 on the appliances sold in 1980. Ending inventory on December 31, 1980, is \(\$ 120,000\). a What were the total acquisitions of merchandise inventory during 1980 ?
b What is the cost of goods sold for 1980?

c What was the dollar amount of repairs made during the year 1980?
d What is the Warranty Expense for 1980?
e Give journal entries for repairs made during 1980, for the warranty expense for 1980 , and for cost of goods sold for 1980 .

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EXHIBIT 10.8 Anderson Company (Problem 9) TRIAL BALANCE-END OF 1979 Adjusted Preclosing Estimated Liability for Warranty Repairs Merchandise Inventory. Sales. Warranty Expense All Other Accounts Totals TRIAL BALANCE-END OF 1980 Estimated Liability for Warranty Repairs Merchandise Inventory.. Sales.... Warranty Expense All Other Accounts Totals Postclosing Dr. Cr. Dr. Cr. $ 3,000 $ 3,000 $ 100,000 $100,000 800,000 18,000 882,000 197,000 110,000 207,000 $1,000,000 $1,000,000 $210,000 $210,000 Unadjusted Trial Balance Dr. Cr. $ 14,000 820,000 $1,000,000 266,000 100,000 $1,100,000 $1,100,000