Part A

Pest Free Control Services Ltd provides a $12-$month warranty on pest control work performed by the

entity. On $1$ January $2022,$ there was a credit balance of $$85,000$ in its warranty provision account.

During the year ended $31$ December $2022,$ Pest Free Control Services Ltd incurred $$72,250$ servicing

warranty claims. $80\%$ of the warranty costs were in the form of wages expenses with the remaining

$20\%$ related to use of sprays and other materials. During the year ended $31$ December $2022,$ Pest

Free Control Services Ltd$$s revenue from pest control work contracts was $$2,835,000.$ Warranty

liabilities are estimated as $3\mathrm{.}5\%$ of pest control revenue for the previous $12$ months.

Required:

i$)$ Prepare journal entries to record:

a$)$ warranty claims during the period. $(1\mathrm{.}5$ marks$)$

b$)$ adjustments to the warranty provision account at $31$ December $2022.$ Please show your

workings for this part of the question. $(2$ marks$)$

ii$)$ Comment on the appropriateness of the warranty provision at $1$ January $2022$ if the warranty

provision account had a credit balance of $$65,000.(1\mathrm{.}5$ marks$)$

$($Enter debit entries first followed by credit entries. Please include Dr and Cr as appropriate.

Narrations are not required. Ignore GST$.)$

QUESTION $2$

Part B

On $30$ June $2022,$ Ideal Aged Care Ltd issued a $$9,500,0008\%1-$year note payable. Interest is

accrued on $31$ December and $30$ June each year. Ideal Aged Care Ltd$$s year end is $30$ June.

Required:

Prepare journal entries to record these events in the books of Ideal Aged Care Ltd:

$($a$)$ the issue of the note on $30$ June $2022.(1$ mark$)$

$($b$)$ accrued interest at $31$ December $2022.(1$ mark$)$

$($c$)$ the actual payment of the note at maturity. $(2$ marks$)$

$($Enter debit entries first followed by credit entries. Please include Dr and Cr as appropriate.

Narrations are not required. Ignore GST$.$