Question
[45] MedTech, Inc., uses the revenue approach to account for warranties. During 2020, the company sold a special MRI scanning machine to the Montreal General
[45] MedTech, Inc., uses the revenue approach to account for warranties. During 2020, the company sold a special MRI scanning machine to the Montreal General Hospital for $750,000. The equipment carried a two-year warranty which was included in the price. It was estimated that 3% of the selling price represented warranty revenues. Further, 60% of this revenue related to 2020, and the balance was allocated to the year 2021. Assume that MedTech incurred costs of $4,700 to service the contract during 2020. Determine the warranty revenue, the unearned warranty revenue and the warranty expense reported by MedTech in its 2020 financial statements.
a.Warranty Revenue - $22,500; Unearned Warranty Revenue - $22,500; Warranty Expenses - $7,050.
b.Warranty Revenue - $22,500; Unearned Warranty Revenue - $22,500; Warranty Expenses - $14,100.
c.Warranty Revenue - $13,500; Unearned Warranty Revenue - $13,500; Warranty Expenses - $14,100.
d.
Warranty Revenue - $13,500; Unearned Warranty Revenue - $22,500; Warranty Expenses - $7,050.
e.
None of the above.
[46] On October 1, 2018, Shatner Company issued $12,000,000 face-value debentures. The bonds had a coupon interest rate of 10% per annum, payable semi-annually on 31 March and 30 September, and mature on 30 September 2028. The bonds were issued at a price to yield 8%. The issue price of the bonds would have been
a.$13,630,880.
b.$13,610,376.
c.$5,476,680.
d.
$5,558,280.
e.
None of the above.
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