DALLAS Corp is preparing the December 31, 2020, year end financial statements Following are selected unadjusted account balances Estimated warranty liability $ 6,520 120 day note payable, 4 $ 86,000 Income tax expense 125,400 Unearned revenues 302,000 Mortgage payable, 5 450,000 Warranty expense 7,000 Additional information $11,400 of income tax was accrued monthly from January through to November inclusive and paid on the 15th day of the following month The actual amount of tax expense for the year is determined to be $132,040 A customer is suing the company Legal advisers believe it is probable that the company will have to pay damages, the amount of which will approximate $146,000 given similar cases in the industry During December, DALLAS had sales of $716,000 5 of sales typically require warranty work equal to 15 of the sales amount Mortgage payments are made on the first day of each month $112,100 of the Unearned Revenues remain unearned at December 31, 2020 The 120 day note payable was dated November 15, 2020 REQUIRED 1 Prepare any required adjusting entries at December 31, 2020, for each of the above (Use 365 days a year Do not round intermediate calculations and round the final answers to 2 decimal places ) (IF no entry indicate no entry) 2 Explain what ratios would be affected if Unearned Revenues are reported incorrectly 3 Explain why recording Warranty Liability is important 4 Explain why it is important to identify the current portion of a mortgage (you do not need to calculate)

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Posted on Jul 16, 2024

DALLAS Corp. is preparing the December 31, 2020, year-end financial statements. Following are selected unadjusted account balances: Estimated warranty liability $ 6,520 120-day note payable,

DALLAS Corp. is preparing the December 31, 2020, year-end financial statements. Following are selected unadjusted account balances:


Estimated warranty liability	$	6,520	120-day note payable, 4%	$	86,000
Income tax expense		125,400	Unearned revenues		302,000
Mortgage payable, 5%		450,000	Warranty expense		7,000

Additional information:

$11,400 of income tax was accrued monthly from January through to November inclusive and paid on the 15th day of the following month. The actual amount of tax expense for the year is determined to be $132,040.
A customer is suing the company. Legal advisers believe it is probable that the company will have to pay damages, the amount of which will approximate $146,000 given similar cases in the industry.
During December, DALLAS had sales of $716,000. 5% of sales typically require warranty work equal to 15% of the sales amount.
Mortgage payments are made on the first day of each month.
$112,100 of the Unearned Revenues remain unearned at December 31, 2020.
The 120-day note payable was dated November 15, 2020.

REQUIRED:

1. Prepare any required adjusting entries at December 31, 2020, for each of the above. (Use 365 days a year. Do not round intermediate calculations and round the final answers to 2 decimal places.) (IF no entry indicate no entry)

2. Explain what ratios would be affected if Unearned Revenues are reported incorrectly

3. Explain why recording Warranty Liability is important

4. Explain why it is important to identify the current portion of a mortgage (you do not need to calculate)