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Superior Skateboard Company, located in Ontario, is preparing adjusting entries at December 31, 2020. An analysis reveals the following: During December, Superior sold 6,700 skateboards
Superior Skateboard Company, located in Ontario, is preparing adjusting entries at December 31, 2020. An analysis reveals the following:
- During December, Superior sold 6,700 skateboards that carry a 60-day warranty. The skateboard sales totalled $392,000. The company expects 8% of the skateboards will need repair under warranty and it estimates that the average repair cost per unit will be $40.
- A disgruntled employee is suing the company. Legal advisers believe that it is probable that Superior will have to pay damages, the amount of which cannot be reasonably estimated.
- Superior needs to record previously unrecorded cash sales of $2,120,000 (cost of sales 65%) plus applicable HST.
- Superior recognizes that $97,000 of $162,000 received in advance for skateboards has now been earned.
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