C. Clean-All, Inc. sells washing machines with a 3-year assurance type warranty. In the past, Clean-All...

C. Clean-All, Inc. sells washing machines with a 3-year assurance type warranty. In the past, Clean-All has found that in the year after the sale, warranty costs have been 3% of sales; in the second year after sale, 5% of sales; and in the third year after sale, 7% of sales. the following data are also available:

Year Sales Warranty Expenditures

2018 650,000 82,000

2019 700,000 85,000

Instructions:

1. Prepare the journal entries for the preceding transactions for 2018-2019. Closing entries are not required.

2. Determine the amount Clean-All will report as liability on December 31, 2019, assuming the liability had a balance of $101,200 on December 31, 2017.

Expert Solution

1
2018
	Debit	Credit
Cash (or Accounts Receivable)	650000
Sales revenue		650000

Warranty Expense	97500		=650000*(3%+5%+7%)
Estimated Warranty Liability		97500

Estimated Warranty Liability	82000
Cash		82000

2019
	Debit	Credit
Cash (or Accounts Receivable)	700000
Sales revenue		700000

Warranty Expense	105000		=700000*(3%+5%+7%)
Estimated Warranty Liability		105000

Estimated Warranty Liability	85000
Cash		85000

2
Estimated Warranty Liability,December 31, 2017	101200
Add: Warranty expense, 2018	97500
Add: Warranty expense, 2019	105000
Less: Warranty Expenditures, 2018	-82000
Less: Warranty Expenditures, 2019	-85000
Estimated Warranty Liability,December 31, 2019	136700

ekkarill92 answered 11 months ago

Give an example of an assurance-type warranty and an example of a service-type warranty. Be specific:...

Give an example of an assurance-type warranty and an example of a service-type warranty. Be specific: think about the types of warranties offered by businesses. I want real life examples. In general, what are two key differences in these two types of warranties? Explain, explain, explain!

OSE provides a one year warranty on all its electronic products. The warranty is an assurance...

OSE provides a one year warranty on all its electronic products. The warranty is an assurance against manufacturing defects. In December 2016, OSE sold $500,000 worth of electronic products. The cost of the goods sold was $250,000 and OSE estimates the cost of repairs under the warranty to be $5,000. During the financial year ended December 2017, OSE incurred cost of $3,000 to repair the products under warranty that were sold in December 2016. It also incurred costs of $1,000...

A company sells washing machines for $340 each. To produce a batch of n washing machines,...

A company sells washing machines for $340 each. To produce a batch of n washing machines, there is a cost of $249 per washing machine and a fixed or setup cost of $14,600 for the entire batch. Determine a function that gives the profit in terms of the number of washing machines produced. What is the least number of washing machines the company can sell in order to have a profit of $14,000?

During 2016, Rao Co. introduced a new line of machines that carry a one-year assurance warranty...

During 2016, Rao Co. introduced a new line of machines that carry a one-year assurance warranty against manufacturer’s defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 3% in the year after sale. Rao spent $39,000 of warranty expenses in 2016. Sales $ 1,600,000, Actual Warranty Expenditures $ 39,000 Please provide 2016 journal entries associated with the warranty and sale.

The company sells an industrial line of products that are all subject to a 3-year warranty....

The company sells an industrial line of products that are all subject to a 3-year warranty. Prior experience has resulted in an average warranty cost of 3% of revenue for its products. The company had an accrued warranty liability of $500,000 at December 2018. During January of 2019, product sales were $6 million, and the actual warranty costs incurred were $145,000. a. Prepare journal entries to record product sales (assume all credit sales), the warranty accrual, and actual warranty costs...

Landcaster Inc. sells its products with a 2-year service-type warranty. On January 1, Year 1, Landcaster...

Landcaster Inc. sells its products with a 2-year service-type warranty. On January 1, Year 1, Landcaster sells 60 machines for $2,500 each, on account. Landcaster determines that the machines normally sell for $2,275 each and the service-type warranty could be purchased for $225 per machine. In Year 1, Landcaster pays $5,000 for warranty costs. Required: Landcaster Inc. sells its products with a 2-year service-type warranty. On January 1, Year 1, Landcaster sells 60 machines for $2,500 each, on account. Landcaster...

1) Farmers Tool Company sells lawn mowers with a 2-year service-type warranty. The warranty costs $99....

1) Farmers Tool Company sells lawn mowers with a 2-year service-type warranty. The warranty costs $99. On November 1, 2017, Farmers Tool Company sold 20 lawnmowers at $2,000 each. Ten warranties were sold. On July 14, 2018, $500 is spent on warranty costs. Prepare the journal entries related to the sale on November 1st and for the warranty costs incurred on July 14th. SHOW YOUR CALCULATIONS!!! Do not forget journal entry descriptions. 2) Diamond Corporation declared a cash dividend of...

ABC Pty Ltd sells upmarket washing machines. It had $200,000 stock on hand at the beginning...

ABC Pty Ltd sells upmarket washing machines. It had $200,000 stock on hand at the beginning of the 2017/2018 financial year. It purchased $50,000 of additional trading stock during the income year. The closing stock on hand was $130,000. At the beginning of the 2018/2019 financial year ABC Pty Ltd had $130,000 stock on hand. It did not purchase any stock during the year as it was having financial difficulties. In fact, in September 2018 ABC gave two washing machines...

All Clean is the only company selling all-in-one washer–dryer machines. The price of a machine is...

All Clean is the only company selling all-in-one washer–dryer machines. The price of a machine is P, while Q is the quantity of machines sold per quarter. The following equations describe the market for All Clean's machines: Demand: P = 600 – 5Q ♦ Marginal Revenue: MR = 600 – 10Q Total Cost: TC = 2000 + 60Q + 2.5Q2 ♦ Marginal Cost: MC = 60 + 5Q _____________________________________________________ What is All Clean's profit at the profit-maximizing quantity?

Metlock, Inc. sells products that carry a two year warranty. Any defective product is replaced with...

Metlock, Inc. sells products that carry a two year warranty. Any defective product is replaced with a new item taken from inventory. Management believes that this is the most cost effective way to deal with any defects or customer complaints. Estimates of claims are expected to be 2 out of every 100 units sold. The units sell for $32 and cost $22. All sales are on account, and the 13% HST is not included in the selling price. Also, in...

Question