On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company’s cost per new razor is $20 and its retail selling price is $75 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred.

2016

2017

1.1 Prepare journal entries to record above transactions and adjustments for 2016.
ow much warranty expense is reported for November 2016 and for December 2016?

How much warranty expense is reported for January 2017?

What is the balance of the Estimated Warranty Liability account as of December 31, 2016

What is the balance of the Estimated Warranty Liability account as of January 31, 2017?

Amber Corp. – Accounting for Accounts Receivable (all dollar values are in 000’s).

On December 31, 2015 Amber Co. reported "Accounts Receivable, net realizable value" of $5,440 on their balance sheet and "Allowance for Uncollectible Accounts" of $325 in their footnotes. Thus, the gross amount of accounts receivable is $5,765.

The company's sales grew dramatically in 2016, and the total credit sales, net of returns were $96,755. They collected cash from customers on account of $86,775. The company wrote off accounts of $425.

Management using the Accounts Receivable approach for estimating uncollectable accounts. Amber's credit terms are that accounts are due within 60 days. On December 31, 2016, Amber found that 50% of the accounts were not past due, 25% were 60-90 days old, and 25% were over 90 days old. Amber assesses the probability of collection as follows: not past due at 98%, 60-90 days past due at 96%, and over 90 days past due at 90%.

1. What is the total dollar amount owed to Amber Company by its customers at December 31, 2015?

2. What is the total dollar amount owed to Amber Company by its customers at December 31, 2016?

3. What is the balance in the allowance for uncollectible accounts at December 31, 2016?

4. What is the net realizable value of accounts receivable at December 31, 2016?

5. Show how the receivables would be reported on the balance sheet at December 31, 2016.

6. What amount will be reported for bad debts expense (i.e., provision for bad debts) on the income statement for the fiscal year ended December 31, 2016?

HW 20

A researcher wants to know if students are more successful in taking online courses now as compared to 2016. In 2016, 44% of students taking an online class passed the class. She collects data from 125 online students, and finds that 58 of them passed their classes . Test her claim that the percentage of successful completion has increased since 2016.

*What is the null hypothesis?                            [ Select ]                       ["HA: mu>0.44", "H0: p=44", "H0: mu=44", "H0: p=0.44", "H0: mu=0.44"]      

*What is the alternative hypothesis?                            [ Select ]                       ["HA: mu < 0.44", "HA: P < 0.44", "HA: p > 0.44", "H0: mu is not equal to 0.44"]      

*This test is                            [ Select ]                       ["right tailed", "left tailed", "two tailed"]      

*Which distribution and what degrees of freedom do you need?                            [ Select ]                       ["The normal distribution with 124 degrees of freedom.", "The normal distribution", "The student t-distribution with 124 degrees of freedom.", "The student t-distribution with 125 degrees of freedom."]      

*The test statistic is                            [ Select ]                       ["0.5406", "0.464", "0.0444", "1.96", "0.2944"]      

*The P-value is                            [ Select ]                       ["0.2944", "0.464", "0.0444", "0.5406", "0.048"]      

*What is the conclusion?                             [ Select ]                       ["Reject the null hypothesis. Evidence supports the claim that the percent of successful students is higher than in 2016.", "Fail to reject the null hypothesis. There is insufficient evidence to conclude that the percent of successful students is higher than in 2016.", "Reject the null hypothesis. There is insufficient evidence to conclude that the percent of successful students is higher than in 2016.", "Fail to reject the null hypothesis. Evidence supports the claim that the percent of successful students is higher than in 2016."]      

On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $14 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred.

2016

2017

On November 10, 2016, Lee Co. began operations by purchasing coffee grinders for resale. Lee uses the perpetual inventory method. The grinders have a 60-day warranty that requires the company to replace any nonworking grinder. When a grinder is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company’s cost per new grinder is $24 and its retail selling price is $50 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 10% of dollar sales. The following transactions and events occurred.

2016

Nov.

     16 Sold 50 grinders for $2,500 cash.

     30 Recognized warranty expense related to November sales with an adjusting entry.

Dec.

     12 Replaced six grinders that were returned under the warranty.

     18 Sold 200 grinders for $10,000 cash.

     28 Replaced 17 grinders that were returned under the warranty.

     31 Recognized warranty expense related to December sales with an adjusting entry.

2017

Jan.

    7 Sold 40 grinders for $2,000 cash.

    21 Replaced 36 grinders that were returned under the warranty.

    31 Recognized warranty expense related to January sales with an adjusting entry

Required

1. Prepare journal entries to record these transactions and adjustments for 2016 and 2017.

2. How much warranty expense is reported for November 2016 and for December 2016?

3. How much warranty expense is reported for January 2017?

4. What is the balance of the Estimated Warranty Liability account as of December 31, 2016?

5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017?

Question 2

The following are the inventories for the years 2016, 2017, and 2018 for Parry Company:

Using the below information fill in the answers to parts (a), (b) and (c) for a change in accounting principle

Partial Income Statement using Completed- contract-method for its long-term construction contracts:

Partial Income Statement using Cost-to-Cost-method for its long-term construction contracts:

a)The company wants to change to the Cost-to-Cost-method beginning in 2017. Prepare the comparative Income Statement for 2016 and 2017 below:

b)Prepare the journal entry at the beginning of 2016 to adjust retained earnings (as this is the BEGINNING of the earliest period presented):

c)Assume a retained earnings balance of $1,360,000 as of the beginning of 2015 and NO dividends were paid in any of the years. Prepare the Statement of Changes in Retained Earnings for 2016 and 2017 using the following information for 2015:

On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $14 and its retail selling price is $80 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred.

2016

2017

1.1 Prepare journal entries to record above transactions and adjustments for 2016.

1.2 Prepare journal entries to record above transactions and adjustments for 2017.

2. How much warranty expense is reported for November 2016 and for December 2016?

3. How much warranty expense is reported for January 2017?
4. What is the balance of the Estimated Warranty Liability account as of December 31, 2016?
5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017?

E8-17 (Supplement 8A) Recording Write-Offs and Reporting Accounts Receivable Using the Direct Write-Off Method [LO 8-S1] Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician who installs wiring in new homes. Because the company’s financial statements are prepared only for tax purposes, Jon uses the direct write-off method. During 2015, its first year of operations, Trevorson Electronics sold $30,200 of services on account. The company collected $26,100 of these receivables during the year, and Jon believed that the remaining $4,100 was fully collectible. In 2016, Jon discovered that none of the $4,100 would be collected, so he wrote off the entire amount. To make matters worse, Jon sold only $5,150 of services during the year.

1. Prepare journal entries to record the transactions in 2015 and 2016. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1. Record the service revenue of $30,200 sold on account in 2015.

2. Record the collection of $26,100 from outstanding customer accounts in 2015.

3.Record the write-off of outstanding customer balances of $4,100 determined to be uncollectible in 2016.

4. Record the service revenue of $5,150 sold on account in 2016.

2. 2-a. Using only the information provided (ignore other operating expenses), prepare comparative income statements for 2015 and 2016. 2-b. Was 2015 really as profitable as indicated by its income statement? Yes No 2-c. Was 2016 quite as bad as indicated by its income statement? Yes No

2-c. Was 2016 quite as bad as indicated by its income statement? Yes No

Selected accounts of the Zena Company are listed below. On January 1, 2016, the only intangible asset in the company’s account was Goodwill. This was recorded in 2009 when the company acquired another company and paid $350,000 more than the fair market value of the net identifiable tangible assets acquired. For two years, the company amortized the costs on the basis of a 40-year life, charging a total of $16,800 ($8,400 each year) to an account called Amortization Expense—Goodwill. However, no amortization of goodwill has been recorded since 2010. Transactions and events that took place at the company during 2016 are given below. TRANSACTIONS AND OTHER INFORMATION 1. On May 10, 2016, the company paid $180,000 to purchase a product formula. The formula is expected to have a useful life of eight years. 2. On July 5, the company paid $590,000 for a patent having a useful life of 10 years. 3. On September 22, the company purchased a unique computer program for $230,000. This program has an estimated useful life of five years. 4. During the year, the company recorded various cash expenditures of $205,000 for labor and supplies used in its research department. 5. At the end of 2016, the company reviewed the goodwill shown in the accounts. Based on the profitability of activities acquired in purchasing the other business, the owners of the business think the goodwill has a value of $270,000 and should be of benefit for many more years. 1. Record the transactions for 2016. 2.Record amortization of the intangible assets, where appropriate, for the year ended December 31, 2016. 3. Record impairment of assets, where appropriate, on December 31, 2016.