Part 1. Collie Company sells a single product subject to a six-month warranty that covers replacement parts

Question:

Part 1. Collie Company sells a single product subject to a six-month warranty that covers replacement parts but not labor. The company uses a periodic inventory system to account for merchandise. Prepare journal entries to record the following transactions completed by the company during the month of April.

Apr. 2 Purchased 1,200 units of merchandise for $\$ 30$ per unit, paying cash.

3 Purchased $\$ 3,900$ of spare parts for making repairs to merchandise that is expected to be returned for warranty work.

8 Sold 500 units of merchandise for $\$ 60$ per unit, receiving cash.

11 Repaired 30 units of merchandise that customers returned under the warranty. Replacement parts cost $\$ 750$ and the customers paid $\$ 570$ for labor.

18 Sold 600 units of merchandise for $\$ 65$ per unit.

21 Repaired 22 units of merchandise under the product warranty. Replacement parts cost $\$ 506$ and the customers paid $\$ 396$ for labor.

29 Recorded warranty expense for April. Past experience shows that $4 \%$ of the units sold require warranty work and the average cost of replacement parts is $\$ 24$ per unit returned. Average labor charges are $\$ 18.50$.

Part 2. Terrapin Company expects to accrue 1990 property taxes at the end of each month using the experience of 1989 as a means of estimating the tax. In January 1989, Terrapin's property was appraised at $\$ 900,000$. The 1989 tax levy was $\$ 2.40$ per \$100. In January 1990, Terrapin's property was reappraised at $\$ 990,000$. (The reappraisal was not expected to affect the tax levy of $\$ 2.40$ per $\$ 100$.) Early in June 1990 , the annual tax levy was set at $\$ 2.80$ per $\$ 100$. On November 30, 1990, Terrapin paid the 1990 tax. Complete financial statements are prepared by the company on a monthly basis and the company does not use reversing entries.

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Prepare entries at the end of January, June, November, and December, 1990, to record property tax expense for each of those months and to record the annual tax payment.

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