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kotykmax [81]
2 years ago
8

Carnes Electronics sells consumer electronics that carry a 90-day manufacturer’s warranty. At the time of purchase, customers ar

e offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $412,000 for these extended warranties (approximately evenly throughout the year). Required: 1-a. Does this situation represent a loss contingency? 1-b. How should it be accounted for? 2. Prepare journal entries that summarize sales of the extended warranties and any aspects of the warranty that should be recorded during the year.
Business
1 answer:
saw5 [17]2 years ago
3 0

Answer: See explanation

Explanation:

a. This is not a loss contingency. A loss contingency occurs when the value of an asset is reduced because of an occurence on the future. This isn't the case here as a separate sales transaction occured.

b. To account for it, we have to defer the revenue as a liability and then we will use the straight line basis to calculate the warranty expense.

2. Dr Cash $412,000

Cr Unearned revenue - extended warranties $ 412,000

(To record the sale of extended warranty)

Dr Unearned revenue - extended warranties. $57937.50

Cr. Revenue - Extended Warranties $57937.50

(To record revenue earned on extended warranty)

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Answer:

B) Using a market multiple assumes that the target company is mispriced, while comparable companies are correctly priced.

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3 years ago
Lupe rented her personal residence for 13 days to summer vacationers for $3,800.
Advocard [28]

Answer:

$95,000.

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7 0
3 years ago
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11Alexandr11 [23.1K]

Answer: Percentage change OCF = 27.96%.

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Given that,

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Degree of operating leverage = 3.3

Output rises to 64,000 units,

Degree of Leverage = \frac{Percentage\ change\ in\ Operating\ cash\ Flow}{Percentage\ change\ in\ Quantity}

Percentage change OCF = Degree of Leverage × Percentage change in Quantity

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5 0
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Suppose you just won the state lottery, and you have a choice between receiving $3,500,000 today or a 20-year annuity of $250,00
xeze [42]

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Where; PMT = the periodic cash payment; r = the interest rate per period; n = the total number of periods and PV = present value.

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This will give the rate as 3.67%

4 0
3 years ago
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