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please see attached Question 1 Company sells a machine for $6,500 under a 12-month warranty agreement that requires the company to replace all defective parts
please see attached
Question 1 Company sells a machine for $6,500 under 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 2010 (warranty expense is incurred 30% in 2010, 20% in 2011 and 50% in 2012). As a result of product testing, the company estimates that the warranty cost is $400 per machine ($250 parts and $150 labor). Required: Assuming that actual warranty costs are incurred exactly as estimated, prepare the journal entries that would be made under application of the expense warranty accrual method for the following: a). Warranty costs incurred in 2010. b). Warranty costs incurred in 2011. Question 2 XYZ Company is building a new baseball stadium at a cost of $3,000,000. It received a down payment of $500,000 from local businesses to support the project, and now needs to borrow $2,500,000 to complete the project. It therefore decides to issue $2,500,000 of 9%, 10-year bonds. These bonds were issued on January 1, 2010, and pay interest annually on each January 1, beginning 2011. The bonds yield 6%. Required: a) Prepare the journal entry to record the issuance of the bonds on January 1, 2010. b) Prepare a bond amortization schedule up to and including January 1, 2015, using the effectiveinterest method. c) Assume that on July 1, 2014, XYZ Company retires a half of the bonds at a cost of $1,000,000 plus accrued interest. Prepare the journal entry to record this retirementStep by Step Solution
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