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Gemiola [76]
3 years ago
12

East Corp. manufactures stereo systems that carry a two-year warranty against defects. Based on past experience, warranty costs

are estimated at 4% of sales for the warranty period. During 2005, stereo system sales totaled $3,000,000, and warranty costs of $67,500 were incurred. In its income statement for the year ended December 31, 2005, East should report warranty expense of:
A. $52,500

B. $60,000

C. $67,500

D. $120,000
Business
1 answer:
11Alexandr11 [23.1K]3 years ago
7 0

Answer:

$52,500

Explanation:

Warranty cost are the cost associated with the repair or replacement of a product in case it does not perform as intended after purchase.

It is debited to the warranty expenses account and credited to the warranty liability account.

Total sales for the year - $3,000,000

Warranty estimate basis - 4%

Estimated warranty - 3,000,000 * 4% = $120,000

Warranty cost incurred = $67,500

Balance to be recorded for the year = 120,000 -67,500

$52,500

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3 0
3 years ago
Sparks Corporation has a cash balance of $19,500 on April 1. The company must maintain a minimum cash balance of $16,000. During
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Answer:

Cash borrow  = 10500

so correct option is a. $10,500

Explanation:

given data

Ending cash balance = $16,000

Beginning cash balance = $19,500

expected cash receipts = $68,000

Cash disbursements = $82,000

solution

we know that Ending cash balance is express as

Ending cash balance = Beginning cash balance + Cash receipts - Cash disbursements + Cash borrow   .............................1

we get here Cash borrow put here value

$16,000 = $19,500  + $68,000 - $82,000 + Cash borrow

solve it we get

Cash borrow  = 10500

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4 0
3 years ago
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Answer:

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