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Kruka [31]
2 years ago
9

(a) Dell Computers is a leader in the computer industry with over $ 59 billion in sales each year. A recent annual report for De

ll contained the following note:
Warranty
We record warranty liabilities at the time of sale for the estimated costs that may be incurred under our limited warranty. Factors that affect our warranty liability include the number of installed units currently under warranty, historical and anticipated rates of warranty claims on those units, and cost per claim to satisfy our warranty obligation.
Assume that estimated warranty costs for the current year are $ 500 million and that $ 400 million of warranty work was performed during the year. Provide the journal entries required to recognize warranty expense and the warranty services provided during the year. Assume that all warranty services were paid for with cash.
Business
1 answer:
sp2606 [1]2 years ago
6 0

1. Warranty Expense a/c……………..Dr $501,100,000

                 To warranty payable a/c…………….$501,100,000

(Warranty expense incurred)

   Warranty Payable a/c………………Dr $415,000,000

                 To Cash a/c…………………………..$415,000,000

(Warranty Expense paid by cash)

2. Cash a/c………………………Dr $90,900,000

                 To Unearned revenue a/c………$90,900,000

(Recognize the receipt of cash)

  Unearned revenue a/c…………..Dr $80,050,000 ($90,900,000 - $2,850,000)

                 To Revenue a/c……………………$80,050,000

(Recognized as revenue)

Warranty liability is a legal responsibility account in which a company records the amount of the repair or replacement cost that it expects to incur for products already shipped or services already provided. This can be an extensive liability for more complicated products subject to breakage.

Accrue the warranty expense with a debit to the warranty price account and a credit to the warranty liability account. As actual warranty claims are received, debit the warranty liability account and credit the stock account for the cost of the replacement parts and products sent to customers.

learn more about liability here brainly.com/question/25687338

#SPJ4

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Fixed costs may be relevant in a decision.<br> A. True<br> B. False
zhuklara [117]

Answer:

A. True

Explanation:

Fixed costs can be defined as predetermined expenses in a business that remain constant for a specific period of time regardless of the quantity of production or level of outputs. Some examples of fixed costs in business are loan payments, employee salary, depreciation, rent, insurance, lease, utilities etc.

Fixed costs may be relevant in a decision because it affects the amount of future cash-flow of a business entity.

For instance, the high fixed costs are usually a determinant for pricing a product that aren't produced in mass because to break even, businesses would need to rake in more revenues to meet the the increasing (high) fixed costs.

5 0
3 years ago
Cork inc. declared a $160,000 cash dividend. it currently has 6,000 shares of 6%, $100 par value cumulative preferred stock outs
BaLLatris [955]
Cork has to pay preferreds first. Owe 6000 x 6 or 36,000 to preferred holders. So 160k - 36k = $124k left for common.
3 0
3 years ago
order for the auto parts shop is $80; the holding cost of carrying 1 unit is $1.2 per year. The shop has 360 working days per ye
Galina-37 [17]

Answer:

Total carrying cost is $240.

Explanation:

EOQ=√(2*D*Co)/Cn

EOQ= 400 units

Annual carrying cost= (EOQ/2)*Cn

=(400/2)*1.20

=$240

4 0
3 years ago
Read 2 more answers
Max Company uses 20,000 units of Part A in producing its products. A supplier offers to make Part A for $7. Max Company has rele
Vadim26 [7]

Answer:

$20,000

Explanation:

Max company makes use of 20,000 units of part A to manufacture its product

A supplier offers to produce part A for $7

Max company has relevant costs to $8 per unit to produce part A

Therefore, the opportunity cost of not buying part A from the supplier can be calculated as follows

Opportunity cost= 20,000 units of part A($8-$7)

= 20,000 units×$1

= 20,000×$1

= $20,000

Hence the opportunity cost of not buying part A from the supplier when there is excess capacity is $20,000

6 0
3 years ago
Brian lives in Chicago and runs a business that sells pianos. In an average year, he receives $793,000 from selling pianos. Of t
umka21 [38]

Answer:

Brian

1. Implicit and Explicit Costs:

Implicit costs:

The rental income Brian could receive if he chose to rent out his showroom

The salary Brian could earn if he worked as a financial advisor

Explicit costs:

The wages and utility bills that Brian pays

The wholesale cost for the pianos that Brian pays the manufacturer

2. Brian's accounting and economic profit of his piano business:

Accounting profit = $62,000

Economic profit (loss) = ($3,000)

Explanation:

a) Data and Calculations:

                               Accounting Profit     Economic Profit

Sales Revenue            $793,000                $793,000

Cost of pianos              430,000                   430,000

Wages and utility bills   301,000                    301,000

Implicit (Opportunity) Costs:

Rent                                                                   15,000

Salary as an accountant                                  50,000

Total costs                    731,000                    796,000

Profit (loss)                  $62,000                     ($3,000)

b) Implicit costs are opportunity costs.  They include the costs that arise from forgone benefits when another opportunity is taken instead of the other.  Explicit costs are costs that are actually incurred by taking an opportunity.

8 0
2 years ago
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