Acct2 Week 2

E13-11
(a) Prepare 2014 entries for Crow using the expense warranty approach. Assume that Crow estimates the total cost of servicing the warranties will be $120,000 for 2 years.
Warranty Liability………….$20,000 Warranty Cash …………………...$20,000 (Warranty cash incurred)

Warranty Expense …............120,000 Warranty Liability……………….....120,000 (To accrued estimated warranty cost)
(b) Prepare 2014 entries for Crow assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $150,000 relates to sales of warranty contracts. Crow estimates the total cost of servicing the warranties will be $120,000 for 2 years. Estimate revenues to be recognized on the basis of costs incurred and estimated costs.
Use the sales warranty approach Cash………………150,000
Unearned warranty Revenue………150,000

Warranty Expense……….120, 000 Warranty Liability……………………….120, 000

E13-12

Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2014.
Purchase of Premium
Inventory or Premium……………………………7,040
Cash………….7,040
(8,800 X $.80)
Sale of Soap powder
Cash…………….363,000
Sale Revenue……….363,000
(110,000 X $3.30)
Actual Redemption
Premium Expense …………………..3,520 Inventor y of Premium……………..3,520
(44,000/10)=4400*.80=3,520
Liability for outstanding Premium
Premium Expense…………………………..1,760 Premium Liability………………1,760
Calculation
Total box tops sold………………… 110,000
Estimated Redemption……………66,000
Box Top Redeem …………………….44,000
Estimated future redemption……22,000
Cost =22,000/10=2,200*.80=1,760

P13-9

A) 2014 2015

Sale of Candy Bar
Cash…………………………..868,620 Cash………………………….823,080 Sale Revenue……..868,620 Sale Revenue………………..823,080
(250,000 x $2.25) (330,000 x $2.25)

Purchase