to Splish Brothers Inc for the current year ending Decemoer

to Splish Brothers, Inc. for the current year ending Decemoer 3 Listed below are selected events transactions relating Splish Brothers manufactures laptop computers for sale in its own stores and for sale by other retailers. 1. On December 1, Splish Brothers accepted an order from a new customer, Bonita Computers. Bonita has a questionable credit history, so Splish Brothers requires a $9,000 2. 3. During the year, Splish Brothers was sued by a competitor for a patent violation. The competitor is claiming that Splish Brothers\'s liability is $2,200,000. Splish Brothers\'s deposit from Bonita in order to begin production on its order th cludes the 7% sales tax Splish Brothers must remit to the state by the fite During December, cash sales at Sp ish B others\'s reta day of the following month. locations totaled $3638,000 which attorneys have advised it that it is probable that the court will find for the company\'s competitor. The attorneys estimate that the liability under the suit could be as little as $88,000 or as much as $440,000. The attorneys do not believe any amount within this range is a better estimate of Splish Brothers\'s liability than any other amount within the range. 4. Splish Brothers provides one-year warranties on the laptops it sells. During the year, Splish Brothers\'s laptop sales totaled $88,000,000. Historically, Splish Brothers\'s warranty liability has been one percent of total sales. Splish Brothers began the year with a warranty liability balance of $700,000. Warranty expenditures during the year were $680,000 for computers sold in prior years and $211,000 for computers sold during the year. These expenditures were recorded as credits to cash and debits to the warranty liablity account. Any remaining warranty liability is expected to relate to computers sold during the cutrent year Prepare all the journal entries necessary to record the transactions noted above as they occurred and any adjusting journal entries relative to the transactions that would be required to present fair financial statements at December 31. For simplicity, assume that adjusting entries are recorded only once a year on December 31. (If no entry is required, select \"No Entry for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do net indent manually.)

Solution

Journal Entries :-

S.No.	Particulars	Debit($)	Credit($)
1)	Cash A/c Dr.	9000
	To Accounts Receivable A/c		9000
2)	Cash A/c Dr.	3892660
	To Sales Revenue A/c		3638000
	To Sales Tax Payable A/c ($3638000*7%)		254660
3)	No Entry
4)	Waranty Expenses A/c Dr.	900000
	To Waranty Liability A/c		900000