Question

1)

A company sells soccer goals to customers over the Internet. History shows that 2% of the company’s goals will need repair under the warranty program. For the year, the company has sold 4,100 goals and 48 have been repaired. If the estimated cost to repair a goal is $140, what would be the Warranty Liability at the end of the year?

	a.	$5,260
	b.	$0.
	c.	$4,760.
	d.	$11,480.
	e.	$4,810.

2)

On January 23, a company purchases inventory for $100. On February 12, the inventory is sold for $150 on account. Which of the following is recorded on February 12?

	a.	Debit sales revenue for $150.
	b.	Credit inventory for $150.
	c.	Two of the other answers are correct.
	d.	Debit cost of goods sold for $100.
	e.	Debit accounts receivable for $100.

3)

On January 23, a company purchases inventory for $100. On February 12, the inventory is sold for $150 on account. Which of the following is recorded on February 12?

	a.	Debit sales revenue for $150.
	b.	Credit inventory for $150.
	c.	Two of the other answers are correct.
	d.	Debit cost of goods sold for $100.
	e.	Debit accounts receivable for $100.

Answer 1

Question 1

Answer: c. $4,760

Calculation

Warranty liability = (4,100 x 2% x $140) - (48 x $140)

= $11,480 - $6,720

= $4,760

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Question 2

Answer: d. Debit cost of goods sold for $100

.

Question 3

Answer: d. Debit cost of goods sold for $100

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Date	Accounts and Explanation	Debit	Credit
Feb. 12	Accounts Receivables	$150
	Sales Revenue		$150
	(To record sales)
Feb. 12	Cost of Goods Sold	$100
	Inventory		$100
	(To record cost of goods sold)