P13.7 (Lo 3) (Warranties) Alvarado Company sells a machine for $7,400 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair Labor at no cost to the customers. With sales being made evenly throughout the year, the company sells 600 machines in 2020 (warranty expense is incurred half in 2020 and half in 2021 ). As a result of product testing, the company estimates that the total warranty cost is $390 per machine ($170 parts and $220 Labor). Problems Instructions Assuming that actual warnanty costs are incurred exactly as estimated, what journal entries would be made relative to the following facts? a. Sale of machinery and warranty expense incurred in 2020. b. Warranty acerual on December 31,2020 . c. Warranty costs incurred in 2021 . d. What amount, if any, is disclosed in the balance sheet as a liability for future warranty costs as of December 11, 2020 ? 4. Among the short-term obligations of Larsen Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Dennison National Bank. These are 90-day notes, renewable for another 90 -day period. These notes should be classified on the balance sheet of Larsen Company as a. current liabilities. b. deferred charges. c. long-term liabilities. d. intermediate debt. 5. Which of the following is not true about the discount on short-term notes payable? a. The Discount on Notes Payable account has a debit balance. b. The Discount on Notes Payable account should be reported as an asset on the balance sheet. c. When there is a discount on a note payable, the effective interest rate is higher than the stated discount rate. d. Discount on Notes Payable is a contra account to Notes Payable. 6. Which of the following may be a current liability? a. Withheld Income Taxes b. Deposits Received from Customers c. Deferred Revenue d. All of these answers are correct. 7. Which of the following items is a current liability? a. Bonds (for which there is an adequate sinking fund properly classified as a long-term investment) due in three months. b. Bonds due in three years. c. Bonds (for which there is an adequate appropriation of retained eamings) due in eleven months. d. Bonds to be refunded when due in eight months, there being no doubt about the marketability of the refunding issue. 8. Which of the following should not be included in the current liabilities section of the balance sheet? a. Trade notes payable b. Short-term zero-interest-bearing notes payable c. The discount on short-term notes payable d. All of these answers are correct. 9. Which of the following is a current liability? a. Preferred dividends in arrears b. A dividend payable in the form of additional shares of stock c. A cash dividend payable to preferred stockholders d. All of these answers are correct. 10. Stock dividends distributable should be classified on the a. income statement as an expense. b. balance sheet as an asset. c. balance sheet as a liability. d. balance sheet as an item of stockholders' equity