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Warranties Practice Exercise Requirement 1: Complete necessary entries for each of the below transactions Lintrix, Inc. sold 350 High Quality DVD players in the amount
Warranties Practice Exercise Requirement 1: Complete necessary entries for each of the below transactions Lintrix, Inc. sold 350 High Quality DVD players in the amount of $275 each during 2022 (for cash). The DVD's have a cost basis of $225 to the company. Lintrix offers a free 2 year warranty on all DVD players. Historically, they have experienced an average warranty cost of 2% of the sales price. Lintrix uses the perpetual inventory method. They started the period with a $0 balance in estimated warranty liability. Record the sale of the 350 DVD players (this portion goes back to our earlier inventory discussion topics.) The practice exercise YouTube video will also help you out here.) A.) Record the Warranty Expense Adjusting Entry at the end of 2022 (year 1.) B.) During 2022 (year 1), 10 of the DVD players are returned due to a severe malfunction and had to replaced with an entirely new unit out of inventory. Record this entry. C.) D. What is the total warranty expense that would have been recorded for 2022 (year 1)? E. What is the total warranty liability at the end of 2022 (year 1)? F. What is the total warranty expense that would have been recorded for 2023 (year 2), assuming no other sales have taken place in year 2 (all of the sales were in year 1.) G. What is the total warranty liability at the end of 2023 (year 2)? H. Comment on the company's estimated warranty percentage. Is it sufficient? Would you recommend they increase or decrease it?
| Warranties Practice Exercise | |||||||
| Requirement 1: Complete necessary entries for each of the below transactions | |||||||
| Lintrix, Inc. sold 350 High Quality DVD players in the amount of $275 each during 2022 (for cash). The DVD's have a cost basis of $225 to the company. Lintrix offers a free 2 year warranty on all DVD players. Historically, they have experienced an average warranty cost of 2% of the sales price. Lintrix uses the perpetual inventory method. They started the period with a $0 balance in estimated warranty liability. | |||||||
| Record the sale of the 350 DVD players (this portion goes back to our earlier inventory discussion topics.) The practice exercise YouTube video will also help you out here.) | |||||||
| A.) | |||||||
| Record the Warranty Expense Adjusting Entry at the end of 2022 (year 1.) | |||||||
| B.) | |||||||
| During 2022 (year 1), 10 of the DVD players are returned due to a severe malfunction and had to replaced with an entirely new unit out of inventory. Record this entry. | |||||||
| C.) | |||||||
| D. What is the total warranty expense that would have been recorded for 2022 (year 1)? | |||||||
| E. What is the total warranty liability at the end of 2022 (year 1)? | |||||||
| F. What is the total warranty expense that would have been recorded for 2023 (year 2), assuming no other sales have taken place in year 2 (all of the sales were in year 1.) | |||||||
| G. What is the total warranty liability at the end of 2023 (year 2)? | |||||||
| H. Comment on the company's estimated warranty percentage. Is it sufficient? Would you recommend they increase or decrease it? | |||||||
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
