I need help with knowing which formula to use. LO 4 1tak $1.200 Required: Use th

Question

I need help with knowing which formula to use.

LO 4 1tak $1.200 Required: Use the horizontal model (or write the journal entry) to show the effects of the Cal b. accrual on June 25, 2016 C. 2. 7.3 ability acount was $25.000 on January 1, 2016, and $34,400 on December 31, 206 Lo 5 Based on an analysis of warranty claims during the past several years, this year's w. Mini-Exercise Other accrued liabilities-warranties The balance of the Estimated Warranty l ranty provision was established at 1.5% of sales, and sales during the year were Other $2,600,000. Required a. What amount of warranty expense ill appear on the income statement for the year o taxesC year ended December 31, 2016? Requ b. What were the actual costs of servicing products under warranty during the year? ac Mini-Exercise 7.4 LO 8 Bonds payable-various issues On July 1, 2016, $12 million face amount of 7%, 10-year bonds were issued. The bonds pay interest on an annual basis on line 30 each year. The market interest rates were slightly higher than 7% when the bonds were sold. b. D ro c. Required a. How much interest will be paid annually on these bonds? b. Were the bonds issued at a premium or discount? Explain. c. Will the annual interest expense on these bonds be more than, equal to, or than the amount of interest paid each year? Explain your answer.

Explanation / Answer

Q7.3 Reqa: Warranty expense for the year: $ 2600,000*1.5% = $39,000 Req B: Actual cost of Servicing: Begininng balance of Warranty Liability: 25000 Add: Provision made during the year 39000 less: Ending Warranty liability: -34400 Actual cost of servicing during the year 29600 Q7.4 Req A: Annual interest on bonds: $ 12000,000*7% = $840,000 Req B: As the market rate is higher than stated rate, the bonds shall be issued at discount. This is because the investor shall be given a incentive in the form of redcued prices for interest income foregone by them. Req C: Interest expense will be more than Interest actuall paid due to the amortization of discount during the period of bonds. Total Interest expense = Interest actually paid+Annual discount amortized.

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