Question
Warranties Polar Company manufactures and sells Ice Machines. Polar provides all customers with a two-year warranty guaranteeing to repair, free of charge, any defects reported
Warranties
Polar Company manufactures and sells Ice Machines. Polar provides all customers with a two-year warranty guaranteeing to repair, free of charge, any defects reported during this time period. During the year, it sold 100,000 Ice Machines for $280 each. Analysis of past warranty records indicates that 12% of all sales will be returned for repair within the warranty period. Polar expects to incur expenditures of $17 to repair each Ice Machine. The account Estimated Liability for Warranties had a balance of $120,000 on January 1. Polar incurred $115,000 in actual expenditures during the year.
Required:
Prepare all journal entries necessary to record the events related to the warranty transactions during the year.
During the year, it sold 100,000 Ice Machines for $280 each.
How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
| Journal |
| Balance Sheet |
| Income Statement | ||||||||||
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| Stockholders | Net | |||||
| Description | Debit | Credit |
| Assets | = | Liabilities | + | Equity |
| Revenues |
| Expenses | = | Income |
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Analysis of past warranty records indicates that 12% of all sales will be returned for repair within the warranty period. Polar expects to incur expenditures of $17 to repair each Ice Machine. The account Estimated Liability for Warranties had a balance of $120,000 on January 1. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
| Journal |
| Balance Sheet |
| Income Statement | ||||||||||
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| Stockholders | Net | |||||
| Description | Debit | Credit |
| Assets | = | Liabilities | + | Equity |
| Revenues |
| Expenses | = | Income |
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Polar incurred $115,000 in actual expenditures during the year. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
| Journal |
| Balance Sheet |
| Income Statement | ||||||||||
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| Stockholders | Net | |||||
| Description | Debit | Credit |
| Assets | = | Liabilities | + | Equity |
| Revenues |
| Expenses | = | Income |
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Determine the adjusted ending balance in the Estimated Liability for Warranties account.
$
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IT Security Risk Control Management An Audit Preparation Plan
Authors: Raymond Pompon
1st Edition
1484221397, 978-1484221396
