Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Specialist Mobile Phones Ltd provides a two-year warranty on the sale of all its products. During the year ended 30 June 2020 the company earned

Specialist Mobile Phones Ltd provides a two-year warranty on the sale of all its products. During the year ended 30 June 2020 the company earned sales revenue of $650,000 and it had a credit opening balance of $14,900 in the warranty provision account. During the year the companys service department repaired products for customers under warranty at a cost of $16,200, of which $10,100 related to labour costs and the remainder was for spare parts. Based on past experience, the company estimates that 3% of its annual sales revenue will be returned by customers for warranty repairs.

a) Prepare the journal entry to record the warranty claims made by customers during the year

b) Prepare the journal entry to record the accrued product warranty expense at 30 June 2020

c) Explain why the provision for warranty is considered a liability in Specialist Mobile Phones Statement of Financial Position

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Essential Controller An Introduction To What Every Financial Manager Must Know

Authors: Steven M. Bragg

2nd Edition

1118169972, 9781118169971

More Books

Students also viewed these Accounting questions