1)

1. Accrued Interest

   On October 1, Kovac, Inc. borrowed $40,000 from National Bank of Silvan on a 1-year, 8% note.

   Required:

   What adjusting entry should Kovac make at December 31?

   Dec. 31
   	(Record accrual of interest expense)

2)

Warranties

In 2019, Jammer Jumps sold 100 bounce houses at $4,300 each. The bounce houses carry a 5-year warranty for defects. Jammer estimates that repair costs will average 4% of the total selling price. The estimated warranty liability at the beginning of the year was $42,000. Claims of $11,000 were actually incurred during the year to honor their warranties.

Required:

What was the balance in the warranty liability account at the end of the year.

3)

Warranties

Jupiter Tech sells computers and other computer and peripheral equipment. Sales and expected warranty claims for the year are as follows:

Item	Unit Sales		Expected Warranty Claims for Warranty Period	Cost per Claim
Televisions	1,100		1 claim per 100 sold	$68
DVD	300		10 claims per 100 sold	34
Speakers	2,200		4 claims per 100 sold	39

Required:

. Prepare the entry to record warranty expense for Jupiter Tech for the year.

Dec. 31
	(Record warranty expense)

Conceptual Connection: Why does the company have to record a liability for future warranty claims?

Warranties are . Therefore, companies must record and a corresponding if such contingent amounts are .