The Schrock Co. needs help preparing its adjusting entry for warranties. At the end of the year, 1,000 units remain under warranty. Schrock expects 2% will be returned and each return will cost it $30 to repair or replace. Prior to making the adjusting entry, Schrock's warranty liability has a credit balance of $13. What is warranty expense for the period? a. $613 b. $640 c. $587 d. $667 e. None of the above The Mitchell Co. uses accelerated depreciation for its one delivery truck. When the truck was originally acquired, it cost $50,000 and had a useful life of 8 years with no salvage value. Depreciation expense for this year is $3,955. Which statement is most accurate? a. The delivery truck was purchased last year. b. The delivery truck was purchased several years ago. c. We know nothing about the age of the delivery truck Wilson Co. makes sophisticated products that are only possible because of significant investments in research. Wilson's competitors have developed their products by either buying the rights to technology or buying the company that created the technology. In contrast, Wilson has developed all of its technology "in house." If we were to look at the balance sheets of Wilson and one of its competitors who manufactures and sales similar quantities of similar products, what do you expect to see? a. Book value of assets should be similar. b. Wilson's book value of assets exceeds that of its competitor. c. Wilson's book value of assets is less than that of its competitor. d. Wilson's book value of assets will be lower in some years and higher in others During 2014, the Koch Co. reported revenues of $200,000 for GAAP purposes. During the year, accounts receivable increased by $2,500. How much cash did Koch collect from customers in 2014? a. $197,500 b. $200,000 c. $202,500 d. None of the above Sessions Co. builds software to sell to others. IRS rules require expensing software development costs as incurred. Under U.S. GAAP, companies have some leeway between immediately expensing versus capitalizing and amortizing software development costs. During 2013 and all prior years, the Sessions Co. expenses software development costs as incurred for GAAP purposes. Sessions is considering a change to capitalizing and amortizing software development costs incurred in 2014 and thereafter for GAAP reporting purposes. The costs would be amortized over a 3-year useful life. Which statement below is most accurate? a. Sessions will owe the government more taxes in 2014 if it makes this change. b. Sessions will report larger GAAP income tax expense in 2014 if it makes this change. c. Both A & B d. Neither A nor B