Accounting for Warranties / Warranty Revenue
Not what you're looking for?
11. (Warranties) Sheryl Crow Equipment Company sold 500 Rollomatics during 2004 at $6,000 each. During 2004, Crow spent $20,000 servicing the 2-year warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.
Instructions
a. Prepare 2004 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.
b. Prepare 2004 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 earned on the basis of costs incurred and estimated costs
Purchase this Solution
Solution Summary
This post presents the accounting treatment for Warranties for Sheryl Crow Equipment Company using expense warranty approach and then by assuming the warranties as not an integral part of the sale. This includes help on completing the journal entries. All calculations shown with some worded explanation.
Solution Preview
(a)
Entry for cash received from sales
Cash 3,000,000
Sales 3,000,000
(500 X $6,000)
Entry for warranty expenses
Warranty Expense 20,000
Cash ...
Purchase this Solution
Free BrainMass Quizzes
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Introduction to Finance
This quiz test introductory finance topics.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.