Answered step by step
Verified Expert Solution
Question
1 Approved Answer
GONZO THE CLIENT Your firm is auditing Gonzo for the first time in 20x3. You are satisfied that all 'hard' data (sales, cost of sales
GONZO THE CLIENT Your firm is auditing Gonzo for the first time in 20x3. You are satisfied that all 'hard' data (sales, cost of sales and amounts charged to the accruall are materially correct. The client has asked you for guidance in estimating the warranty expense accrual for 20x3. Gonzo Systems Corp. produces large electronic storage systems for the industrial market. Systems sales include a standard one-year product warranty. At the time of the sale, Gonzo accrues for systems' warranty costs as a component of selling, general and administrative costs. The initial systems' warranty accrual is based upon historical experience, expected future costs and specific identification of systems' requirements. The following are selected data for the most recent years, including the year under audit, 20X5. REQUIRED Perform an analysis regression through the origin, with the objective of estimating the warranty provision [expense) for 20x3. Analyze the data for one regression model of your choosing. Based on your analysis, recommend an accru al for 20x3 warranty expense.. Your work should be clear, neat, and in good professional form. The key calculations are done with the RTO template below. Pay attention to sub-scripting. All work should be presented in this spreadsheet. THIS PROBLEM HAS FOUR PARTS t REV Product revenues COS Cost of product sales SGA Selling, general and administrative expenses 20X0 8,828,145 4,406,187 4,566,522 20X1 10,892,857 4,663,667 5,351,246 20X2 12,590,742 5,319,761 6,444,412 Current Year 20X3 13,060,523 5,258,164 6,967,907 Warranty Costs AWG1 Beginning balance, accrued warranty costs WX Add: Estimated warranty expenses WC Less: Claims charged to the accrual AWC Ending balance, accrued warranty costs 237,107 116,414 143,141 210,379 210,379 96,237 155,759 150,857 150,857 139,880 156,427 134,310 134,310 ???
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started