Homework SourseOn November 10 2017 Singh Electronics began to buy and resel
On November 10, 2017, Singh Electronics began to buy and resell scanners for $47 each. Singh uses the perpetual system to account for inventories. The scanners are covered under a warranty that requires the company to replace any non-working scanner within 90 days. When a scanner is returned, the company simply throws it away and mails a new one from inventory to the customer. The company’s cost for a new scanner is only $27. Singh estimates warranty costs based on 15% of the number of units sold. The following transactions occurred in 2017 and 2018 (ignore GST and PST):
Required:
1. How much warranty expense should be reported for November and December 2017?
2. How much warranty expense should be reported for January 2018? (Round your intermediate calculations and final answer to the nearest whole number.)
3. What is the balance of the estimated warranty liability as of December 31, 2017?
4. What is the balance of the estimated warranty liability as of January 31, 2018?
5. Prepare journal entries to record ALL transactions and year-end adjustments (ignore sales taxes).
1.Record the sale of scanners to customers.
2.Record the cost of the November 15 sale.
3.Record the scanner warranty expense and liability at 15% of the units sold.
4.Record the cost of scanner warranty replacements.
5.Record the sale of scanners to customers.
6.Record the cost of the December 15 sale.
7.Record the cost of scanners warranty replacements.
8.Record the scanner warranty expense and liability at 15% of the units sold.
9.Record the sale of scanners to customers.
10.Record the cost of the January 14 sale.
11.Record the cost of scanner warranty replacements.
12.Record the scanner warranty expense and liability at 15% of the units sold.
| 2017 | ||
| Nov. | 15 | Sold 4,000 scanners for $188,000 cash. |
| 30 | Recognized warranty expense for November with an adjusting entry. | |
| Dec. | 8 | Replaced 280 scanners that were returned under the warranty. |
| 15 | Sold 6,800 scanners. | |
| 29 | Replaced 66 scanners that were returned under the warranty. | |
| 31 | Recognized warranty expense for December with an adjusting entry. | |
| 2018 | ||
| Jan. | 14 | Sold 340 scanners. |
| 20 | Replaced 88 scanners that were returned under the warranty. | |
| 31 | Recognized warranty expense for January with an adjusting entry. |
Solution
ans 1
Warranty Expense
November (188000*15%)
28200
December (6800*47*15%)
47940
Total
ans 2warranty expense should be reported for January 2018
2397
(340*47*15%)
3. estimated warranty liability as of December 31, 2017
Warranty expense for November A
28200
Warranty expense for December B
47940
Cost of replacing items in December (280+66)*27 C
9342
Liability balance A+B-C
66798
4. Estimated warranty liability as of January 31, 2018?
Beginning balance
66798
Warranty expense for January
2397
Cost of replacing items in January (88*27)
-2376
Liability balance
66819
Date
Accounts Title
Dr
Cr
15-Nov
Cash
$188,000
Sales
$188,000
Cost of Goods sold (4000*27)
$108,000
Merchandise Inventory
$108,000
30-Nov
Warranty expenses
$28,200
Estimated warranty liability
$28,200
8-Dec
Estimated warranty liability (280*27)
$7,560
Merchandise Inventory
$7,560
15-Dec
Cash
$319,600
Sales
$319,600
Cost of Goods sold (6800*27)
$183,600
Merchandise Inventory
$183,600
29-Dec
Estimated warranty liability
1782
Merchandise Inventory (66*27)
1782
31-Dec
Warranty expenses
$47,940
Estimated warranty liability
$47,940
14-Jan
Cash (340*47)
$15,980
Sales
$15,980
Cost of Goods sold (340*27)
$9,180
Merchandise Inventory
$9,180
20-Jan
Estimated warranty liability
2376
Merchandise Inventory (88*27)
2376
31-Jan
Warranty expenses
$2,397
Estimated warranty liability
$2,397
| ans 1 | Warranty Expense | ||
| November (188000*15%) | 28200 | ||
| December (6800*47*15%) | 47940 | ||
| Total | |||
| ans 2warranty expense should be reported for January 2018 | 2397 | ||
| (340*47*15%) | |||
| 3. estimated warranty liability as of December 31, 2017 | |||
| Warranty expense for November A | 28200 | ||
| Warranty expense for December B | 47940 | ||
| Cost of replacing items in December (280+66)*27 C | 9342 | ||
| Liability balance A+B-C | 66798 | ||
| 4. Estimated warranty liability as of January 31, 2018? | |||
| Beginning balance | 66798 | ||
| Warranty expense for January | 2397 | ||
| Cost of replacing items in January (88*27) | -2376 | ||
| Liability balance | 66819 | ||
| Date | Accounts Title | Dr | Cr |
| 15-Nov | Cash | $188,000 | |
| Sales | $188,000 | ||
| Cost of Goods sold (4000*27) | $108,000 | ||
| Merchandise Inventory | $108,000 | ||
| 30-Nov | Warranty expenses | $28,200 | |
| Estimated warranty liability | $28,200 | ||
| 8-Dec | Estimated warranty liability (280*27) | $7,560 | |
| Merchandise Inventory | $7,560 | ||
| 15-Dec | Cash | $319,600 | |
| Sales | $319,600 | ||
| Cost of Goods sold (6800*27) | $183,600 | ||
| Merchandise Inventory | $183,600 | ||
| 29-Dec | Estimated warranty liability | 1782 | |
| Merchandise Inventory (66*27) | 1782 | ||
| 31-Dec | Warranty expenses | $47,940 | |
| Estimated warranty liability | $47,940 | ||
| 14-Jan | Cash (340*47) | $15,980 | |
| Sales | $15,980 | ||
| Cost of Goods sold (340*27) | $9,180 | ||
| Merchandise Inventory | $9,180 | ||
| 20-Jan | Estimated warranty liability | 2376 | |
| Merchandise Inventory (88*27) | 2376 | ||
| 31-Jan | Warranty expenses | $2,397 | |
| Estimated warranty liability | $2,397 |
