1. Nance Company's annual warranty expense is estimated at 4% of annual net sales of $1,500,000. The warranty liability account had a debit balance of $10,000 and credit balance of $50,000 on December 31, 2010.
2. War N Ty introduced a new product in 2010 with a two-year warranty. Sales and warranty expenditures for 2010-2011 are given. The estimated warranty liability on December 31, 2011 is calculated.
3. Hapos Company introduced a new product line in 2009 with a three-year warranty. Sales and warranty expenditures for 2009-2011 are provided. The warranty expense and liability for 2011 is calculated using expense and accrual approaches.
1. Nance Company's annual warranty expense is estimated at 4% of annual net sales of $1,500,000. The warranty liability account had a debit balance of $10,000 and credit balance of $50,000 on December 31, 2010.
2. War N Ty introduced a new product in 2010 with a two-year warranty. Sales and warranty expenditures for 2010-2011 are given. The estimated warranty liability on December 31, 2011 is calculated.
3. Hapos Company introduced a new product line in 2009 with a three-year warranty. Sales and warranty expenditures for 2009-2011 are provided. The warranty expense and liability for 2011 is calculated using expense and accrual approaches.
1. Nance Company's annual warranty expense is estimated at 4% of annual net sales of $1,500,000. The warranty liability account had a debit balance of $10,000 and credit balance of $50,000 on December 31, 2010.
2. War N Ty introduced a new product in 2010 with a two-year warranty. Sales and warranty expenditures for 2010-2011 are given. The estimated warranty liability on December 31, 2011 is calculated.
3. Hapos Company introduced a new product line in 2009 with a three-year warranty. Sales and warranty expenditures for 2009-2011 are provided. The warranty expense and liability for 2011 is calculated using expense and accrual approaches.
1. Nance Company's annual warranty expense is estimated at 4% of annual net sales of $1,500,000. The warranty liability account had a debit balance of $10,000 and credit balance of $50,000 on December 31, 2010.
2. War N Ty introduced a new product in 2010 with a two-year warranty. Sales and warranty expenditures for 2010-2011 are given. The estimated warranty liability on December 31, 2011 is calculated.
3. Hapos Company introduced a new product line in 2009 with a three-year warranty. Sales and warranty expenditures for 2009-2011 are provided. The warranty expense and liability for 2011 is calculated using expense and accrual approaches.
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Nance Company estimates its annual warranty expense as 4% of annual net sales.
The following data relate
to the calendar year 2010: Net sales P1,500,000 Warranty liability account Balance, Dec. 31, 2010 P10,000 debit before adjustment Balance, Dec. 31, 2010 50,000 credit after adjustment Write the journal entry to record the warranty expense During 2010, War N Ty introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2010 and 2011 are as follows: Actual Warranty Sales Expenditures 2010 P 800,000 P12,000 2011 1,000,000 30,000 P1,800,000 P42,000 On December 31, 2011, if sales are not made evenly, how much is the estimated liability? On January 9, 2009, Hapos Company introduced a new line of products that carry a three year warranty against factory defects. Estimated warranty costs related to peso sales are as follows: 1% of sales in the year of sale 2% in the year after sales 3% in the second year after sale Sales and actual warranty expenditures for the period 2009 to 2011 were as follows: Sales Actual Warranty Expense 2009 P100,000 P750 2010 250,000 3,750 2011 350,000 11,250 Required: 1. Using the “expense” approach, what amount should Hapos report as warranty expense in 2011? 2. Using the “accrual” approach, what amount should hapos report as warranty expense in 2011? 3. Estimated warranty liability as of Dec. 31, 2011 is _____. 4. The “should be” balance of estimated warranty liability in 2011 after making a test for accuracy of estimate 5. The journal entry to correct the balance of estimated warranty liability Problem 1 (4pts) (2) Warranty Expense 60,000.00 (2) Estimated Warranty Liability 60,000.00 Problem 2 (3 points) 66,000.00 [(1,800,000 x 6%)-42,000] Problem 3 (18 points) 1. 11,250.00 3 2. 21,000.00 [350,000 x 6%] 3 3. 26,250.00 [(100k+250k+350k) x 6% -750 - 3,750 - 11,250] 3 4. 27,875.00 3 5. Warranty Expense 1,625.00 3 Estimated Warranty Laibility 1,625.00 3 From 2009 Sales 50 (January 1 to July 1, 2012 x 3% x 6/12) 750.00 From 2010 Sales 125 (January 1 to July 1, 2012 x 2% x 6/12) 1,250.00 125 (January 1 to December 31, 2012 x 3%) 3,750.00 125 (July 1 to December 31, 2012 x 3% x 6/12) 1,875.00 125 (January 1 to July 1, 2013 x 3% x 6/12) 1,875.00 From 2011 Sales 175 (January 1 to July 1, 2012 x 1% x 6/12) 875.00 175 (January 1 to December 31, 2012 x 2%) 3,500.00 175 (July 1 to December 31, 2012 x 2% x 6/12) 1,750.00 175 (January 1 to July 1, 2013 x 2% x 6/12) 1,750.00 175 (January 1 to December 31, 2013 x 3%) 5,250.00 175 (July 1 to December 31, 2013 x 3% x 6/12) 2,625.00 175 (January 1 to July 1, 2014 x 3% x 6/12) 2,625.00 27,875.00 Shortcut: if the question is as of the year 3 (meaning, you should pick the year 4 onwards) 1st year of sale Half of July (half year1 sale x year3 % x 6/12) xxx 2nd year of sale Half of July (half year2 sale x year2% x 6/12) xxx whole year 2 sale x year3% xxx 3rd year of sale Half of July (half year3 sale x year1 % x 6/12) xxx whole year3 sale x year2% xxx whole year3 sale x year3% xxx Estimated Liability as of end of year 3 xxx
