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VNN Inc. sells 20,000 units of its specialty XYZ product in June 20XX. They provide a one-year warranty to their customers. Their experience is that
VNN Inc. sells 20,000 units of its specialty XYZ product in June 20XX. They provide a one-year warranty to their customers. Their experience is that 2% of the units will be returned for repairs. The cost to repair is $25 a unit, all inventory of the company.
- Prepare the entry to record the warranty liability at June 20XX.
- Assume that the companys prediction of returned units comes true in the following April 20XY. Prepare the appropriate journal entry.
- What is the effect of the April 20XY warranty claim on net income in 20XY?
Note: Make sure to format your entries properly, whether you are using a table or plain text entry.
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