Valix Finacc vol 2 Problem 1-26

Financial Accounting Volume 2 2008 Valix-Peralta
Chapter 1 Problem 1-26

Accrual approach

     2008                                                                                                                      

1. Cash (300 x 15,000)                                                                       4,500,000                                Sales                                                                                                               4,500,000                   

2. Warranty expense                                                                          144,000

            Estimated warranty liability (60% x 300 = 180 x 800)                                   144,000

3. Estimated warranty liability                                                             40,000                                Cash                                                                                                                    40,000

     2009                                                                                                                                  

1. Cash (500 x 15,000)                                                                       7,500,000                                Sales                                                                                                               7,500,000                   

2. Warranty expense                                                                          240,000

            Estimated warranty liability (60% x 500 = 300 x 800)                                   240,000

3. Estimated warranty liability                                                           150,000                                Cash                                                                                                                  150,000

                       

Expense as incurred approach

     2008

1. Cash                                                                                               4,500,000

            Sales                                                                                                               4,500,000

2. Warranty expense                                                                            40,000

            Cash                                                                                                                   40,000

     2009

1. Cash                                                                                               7,500,000

            Sales                                                                                                               7,500,000

2. Warranty expense                                                                          150,000

            Cash                                                                                                                  150,000