Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Euro Classics Ltd has been operating a successful business for many years specialising in servicing and reconditioning repairs for classic European automobiles. Servicing costs $750,

Euro Classics Ltd has been operating a successful business for many years specialising in servicing and reconditioning repairs for classic European automobiles. Servicing costs $750, while reconditioning engines costs $1,400. The business has a reputation for good customer service, an important feature of which is the 12 months parts and labour written warranty provided with each service.On 30 June 2021, the owners decided to introduce the practice of providing for warranty expenses at year-end, thereby establishing a warranty expense in the year the vehicles are serviced or reconditioned, and setting up a provision to cover future warranty expenses as they occur. Past records have been examined, and it has been established that, on average, one in twenty vehicles are subject to a claim under the warranty offered. The costs of warranty have amounted to $400 for serviced vehicles and $940 for reconditioned vehicles. During the year ended 30 June 2021, 490 vehicles were serviced and 250 engines were reconditioned. During the year ended 30 June 2022, 22 serviced vehicles and 15 reconditioned engines were repaired under the warranty. The costs of warranty work carried out by Euro Classics were all paid in cash. During the year, 670 vehicles were serviced and 240 engines were reconditioned.At 30 June 2022, it was decided that warranty costs in the following year would increase by 5%. (Ignore GST.)

imageimageimage

(a) Show the general journal entries to record the services/reconditioning for the year, and to establish the provision for warranty at 30 June 2021. (Enter debit entries first, followed by credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) + Date Account Titles and Explanation 2021 June 30 June 30 (To record sales for year 2021) (To provide for future warranty costs) Service revenue Reconditioning revenue Provision for warranty Cash at bank/accounts receivable Warranty expense Debit Credit

Step by Step Solution

3.35 Rating (155 Votes )

There are 3 Steps involved in it

Step: 1

The detailed answer for the above question is provided below Step 22 b ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting

Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett

9th edition

1118608224, 1118608227, 730323994, 9780730323990, 730319172, 9780730319177, 978-1118608227

More Books

Students also viewed these Accounting questions

Question

List six habits that can help you become a more positive thinker.

Answered: 1 week ago