*Problem 156 Merritt Equipment Company sells computers for $1,500 each and also
ID: 2592094 • Letter: #
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*Problem 156 Merritt Equipment Company sells computers for $1,500 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 850 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $40 for parts and $60 for labor. (Assume sales all occur at December 31, 2017.) In 2018, Merritt incurred actual warranty costs relative to 2017 computer sales of $14,000 for parts and $21,000 for labor. Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2017 and 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit List of accounts: 2017 Inventory Cash, Inventory, Accrued Payroll Accounts Receivable Wiyiiilny Sales Revenue Warranty Expense To record sale of computers) 2017 (To record liability against warranty costs) 2018 The transactions of part (a) create what balance under current liabilities in the 2017 balance sheet? Current LiabilitiesExplanation / Answer
Entries to reflect the above transactions for 2017 and 2018 is as shown below:
Current liabilities balance will be:
Warranty liabilities 42,500
Remaikning balance of 85,000 is long term liability
Date Particulars L.F Amount ($) Amount ($) 2017 Dec-31 Account Receivable (1,500*850) 1,275,000 Sales 1,275,000 (for 850 computers sold) Dec-31 Warranty expense (850*(60+40) 85,000 Warranty Liability 85,000 (For recod liability against warranty costs) 2018 Dec-31 Warranty liability 35,000 Inventory 14,000 Cash, Inventory, Accrued Payroll 21,000 (For liability expensed)Related Questions
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