b) Labroy Marine adjusted its Provision for Warranties as at 31 March 2021 so that it would be equal to 6% of sales for the
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b) Labroy Marine adjusted its Provision for Warranties as at 31 March 2021 so that it would be equal to 6% of sales for the year ended on that date. Sales for the financial year ended 31 March 2021 were $625,000 and the Provision for Warranties before the adjustment was $32,000. On 15 May 2021, a successful claim for warranty on faulty products to the cost of $4,200 was made on Labroy Marine.
Required:
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i) Prepare the general journal entry at 31 March 2021 to adjust the Provision
for Warranties to the required level.
(2 marks)
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ii) Record the payment of the warranty claim on 15 May 2021 in general journal format.
(2 marks)
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c) Discuss why control of receivables is just as important as control of cash. (3 marks)
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