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Gala2k [10]
3 years ago
15

Aviation Systems sells its products with a three-year manufacturing warranty. The company's sales revenue is $600,000. Based on

prior experience, the company estimates that warranty costs are 5% of sales revenue. Actual warranty costs related to these sales were $5,000 during the year. How much is the estimated warranty liability reported in the balance sheet this year?
Business
1 answer:
Vikki [24]3 years ago
5 0

Answer:

$30,000

Explanation:

Warranty liability is a liability account used to report the expected amount of repairing or replacing products already shipped. It's a contingency liability and it should be recorded independently  from the actual warranty costs. Therefore, warranty liability, in this case, is:

$600,000 * 0.05 = $30,000

The estimated warranty liability reported in the balance sheet this year is $30,000

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Windsor, Inc. has had 4 years of net income. Due to this success, the market price of its 350,000 shares of $5 par value common
kvasek [131]

Answer:

1.

a.

$9,788,000

b.

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2.

a.

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b.

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Total Stockholders equity section includes the paid in capital of common and preferred stocks, additional paid in capital, retained earnings and reserves accounts.

Total Stockholders equity

Common Stock                      $1,750,000

Paid In Capital account         $4,410,000.

Retained Earning                   <u>$12,700,000</u>

Total Stockholder's Equity    <u>$18,860,000</u>

1.

a.

Retained Earning = $12,700,000 - $2,912,000 = $9,788,000

b.

NO change in retained earning after stock split. Stock split only changes the outstanding numbers of shares and par value of the share.

2.

a.

It will remains the same because balances are transferred from retained earnings to the common stock and paid in capital accounts but the total balance remains the same.

b.

As there is no changes to value of any equity account, so total stockholders equity will remain the same.

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