Question
Leland Corporation sells DVD players. The corporation also offers its customers a 4-year service-type warranty contract. On 1/1/24, Leland sold 10,000 warranty contracts at $50
Leland Corporation sells DVD players. The corporation also offers its customers a 4-year service-type warranty contract. On 1/1/24, Leland sold 10,000 warranty contracts at $50 each; Leland spent $45,000 servicing warranties during 2024 and $65,000 servicing warranties in 2025. Estimated warranty expense for the four-year period is $400,000. The Sales Warranty (Deferred Revenue) approach is applicable. Assume straight-line amortization.
What is the effect on 2025 Net Income?
a.$60,000
b.$65,000
c.$25,000
d.$35,000
e.$100,000
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield
13th Edition
9780470374948, 470423684, 470374942, 978-0470423684
