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Dos Passos Company: Current Liability

Dos Passos Company sells televisions at an average price of $909 and also offers to each customer a separate 3 year warranty contract for $204 that requires the company to perform periodic services and to replace defective parts. During 2012, the company sold 303 televisions and 285 warranty contracts for cash. It estimates the 3 year warranty costs as $13 for parts and $23 for labor and accounts for warranties separately. Assume sales occurred on December 31, 2012, and straight-line recognition of warranty revenues occurs. Use "Inventory" account to record the warranty expense.

(a) Record any necessary journal entries in 2012. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(b) What liability relative to these transactions would appear on the December 31, 2012, balance sheet and how would it be classified?

Dos Passos Company
Balance Sheet (Partial)
December 31, 2012
$
$
In 2013, Dos Passos Company incurred actual costs relative to 2012 television warranty sales of $2,750 for parts and $4,960 for labor.

(c) Record any necessary journal entries in 2013 relative to 2012 television warranties. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
No.
Account Titles and Explanation
Debit
Credit

1. (To record the warranty revenue earned.)

2. (To record the warranty expense.)

(d) What amounts relative to the 2012 television warranties would appear on the December 31, 2013, balance sheet and how would they be classified?

Dos Passos Company
Balance Sheet (Partial)
December 31, 2012
$
$

Solution Summary

The solution is provided in Excel format and explains how to calculate the required values. Cell references are used so that if your numbers are different, all you need to do is change the given data and all parts will be automatically calculated.

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