2. Larkspur manufactures laptop computers for sale in its own stores and for sal

Question

2. Larkspur manufactures laptop computers for sale in its own stores and for sale by other retailers. Larkspur provides one-year warranties on the laptops it sells. During the year, Larkspur's laptop sales totaled $122,000,000. Historically, Larkspur's warranty liability has been one percent of total sales. Larkspur began the year with a warranty liability balance of $980,000. Warranty expenditures during the year were $945,000 for computers sold in prior years and $293,000 for computers sold during the year. These expenditures were recorded as credits to cash and debits to 0 the warranty liability account. Any remaining warranty liability is expected to relate to computers sold during the current year. Prepare all the journal entries necessary to record the transactions noted above as they occurred -and any adjusting journal entries relative to the transactions that would be required to present fair financial statements at December 31. For simplicity, assume that adjusting entries are recorded only once a year on December 31. 122,0 00,000 X 1 1 I, 220,000

Explanation / Answer

date Accounting titles Debit Credit 1 Cash A/c 122000000         To sales A/c 122000000 (being Journal sales occurred has been recorded) year end 2 Warrnety Liability A/c 945000 Warranty Expenses A/c 293000            To cash A/c 1238000 (Being Warrnety expenditures has been recorded) 3 warranty expenses A/c (1220,000-293000) 927000           To Warranty liability A/c 927000 (being warranty liability for the sales during the year has been recorded) Warrnty Liability During the year =1%*$122,000,000 =$1220000

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.