Superior Cars sold a car for $35,000 cash. In addition, changes per year for 5 years and an extended warranty for 5 years. The normal observable stand-alone selling prices are as follows: Car Oil change Service-type warranty $35,000 $50 per oil change $4,000 Required: 1. Determine how much of the revenue should be allocated to the various performance obligations in this transaction. 2. Based on the revenue recognition criteria when revenue should be recognized to the components in this transaction? Explain.
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- USA, a tire manufacturer, guarantees its tires against defects for five years or 60,000 miles, whichever comes first. Suppose Trail Runner USA can expect warranty costs during the five-year period to add up to 3% of sales. Assume that a Trail Runner USA dealer in Denver, Colorado, made sales of $670,000 during 2018. Trail Runner USA received cash for 35% of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totaled $19,000 during 2018. Record the sales, warranty expense, and warranty payments for Trail Runner USA. Ignore cost of goods sold. Post to the Accrued Warranty Payable T-account. The beginning balance was $16,000. At the end of 2018, how much in accrued warranty payable does Trail Runner USA owe to its customers?Stellar Corporation purchased equipment and in exchange signed a two-year promissory note. Thenote requires Stellar to make a single payment of $100,000 in two years. Stellar has other promissory notes that charge interest at the annual rate of 5 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Stellar’s typicalinterest rate of 5 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).Company is contemplating factoring its accounts receivable. The factor will acquire P250,000 of the company’s accounts receivable every 2 months. An advance of 75 percent is given by the factor on receivables at an annual charge of 18 percent. There is a 2 percent factor fee associated with receivables purchased. What is the cost of the factoring arrangement? choose the letter of the correct answera. P30,000.00b. P33,750.00c. P63,750.00d. P103,000.00e. P125,000.00
- National Bank granted a 10-year loan to Abbo Company in the amount of P1,500,000 with a stated interest rate of 6%. Payments are due monthly and are computed to be P16,650. National Bank incurred a P40,000 of direct loan origination cost and P20,000 of indirect loan origination cost. In addition, National Bank charged Abbo Company a 4-point nonrefundable loan origination fee. What is the initial carrying amount of the loan receivable on the part of National Bank? a. 1,440,000 O b. 1,480,000 O c. 1,500,000 d. 1,520,000Calla Corp. sells equipment that comes with a two-year unlimited warranty on parts and labour for repairs. All sales are cash sales. The warranty is intended to assure customers that the appliances will operate as advertised. The warranty is expected to cost 2% of sales in the first year and 4% of sales in the second year, for a total of 6%. The provision for warranty has a credit balance of $189,000 at the beginning of 20X5. The following events and decisions relate to the warranty: 20X5 Sales revenue of $4,650,000 was generated from products covered by the warranty. Both the sale and the warranty provision must be recorded. 20X5 Warranty work consumed parts inventory with a cost of $8,300, and labour of $33,000. Labour costs were paid in cash. 20X6 Sales revenue from products covered by the warranty were $6,650,000. Both the sale and the warranty provision must be recorded. 20X6 Warranty work…Happy Trails guarantees its snowmobiles for three years. Company experience indicates that warranty costs will be approximately 5% of sales. Assume that the Happy Trails dealer in Colorado Springs made sales totaling $700,000 during 2024. The company received cash for 40% of the sales and notes receivable for the remainder. Warranty payments totaled $15,000 during 2024. Read the requirements. Requirement 1. Record the sales, warranty expense, and warranty payments for the company. Ignore cost of goods sold. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin with the entry to record the sales. (Prepare a single compound entry for this transaction.) Date Accounts and Explanation 2024 Debit G Credit Requirements 1. 2. Assume the Estimated Warranty Payable is $0 on January 1, 2024. Post the 2024 transactions to the Estimated Warranty Payable T-account. At the end of 2024, how much in Estimated Warranty Payable does the company…
- Delaney Company leases an automobile with a fair value of $10,000 from Simon Motors, Inc., on the following terms. 1. Non-cancelable term of 50 months. 2. Rental of $200 per month at the beginning of each month. (The present value at 0.5% per month is $8,873.) 3. Estimated economic life of the automobile is 60 months. 4. Delaney's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown. Instructions a. What is the present value of the lease payments to determine the lease liability? b. Record the lease on Delaney's books at the commencement date. c. Record the first month's lease payment (at commencement of the lease). d. Record the second month's lease payment. e. Record the first month's depreciation on Delaney's books (assume straight-line).Southtown Corporation purchased equipment and in exchange signed a two-year promissory note.The note requires Southtown to make a single payment of $100,000 in two years. Southtown hasother promissory notes that charge interest at the annual rate of 6 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Southtown’s typical interest rate of 6 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).3. Show the adjusting journal entry at the end of the first year to record interest on the note.One retailer charges $1038 for a certain computer. A firm of tax accountants buys 7 of these computers. It makes a down payment of $1300 and agrees to amortize the balance with monthly payments at 12% interest for 5 years. Prepare an amortization schedule showing the first four monthly payments for this loan. Write the equation that can be used to find the amount of each monthly payment. PV⚫ PMT= where PV= ☐ 1-(1+) (Type integers or decimals.)
- Wally's Party Warehouse provides wholesale party equipment and materials to party shops. In 2022, Wally's sold 30 bounce houses at $30,000 each. The bounce houses carry a three-year warranty for defects. Wally estimates that repair costs will average 2% of the total selling price. The estimated warranty liability at the beginning of the year was $26,000. Claims of $19,000 were actually incurred during the year to honour warranties. Required: What was the balance in the Estimated Warranty Liability account at the end of the year? fill in the blank 1Valley Produce received $50,000 in vendor financing at 7.8% compounded semiannually for the purchase of harvesting machinery. The contract requires equal annual payments for seven years to repay the debt. Construct the amortization schedule for the debt. How much interest will be paid over the seven-year term? (Do not round intermediate calculations. Round your answers to 2 decimal places. Leave no cells blank - be certain to enter "O" wherever required.) Payment number 0 1 2 4567 Payment $ Total: Interest portion $ Principal portion $ Principal balance $ 50,000.00Wally's Party Warehouse provides wholesale party equipment and materials to party shops. In 2022, Wally's sold 30 bounce houses at $30,000 each. The bounce houses carry a three-year warranty for defects. Wally estimates that repair costs will average 2% of the total selling price. The estimated warranty liability at the beginning of the year was $26,000. Claims of $19,000 were actually incurred during the year to honour warranties. Required: What was the balance in the Estimated Warranty Liability account at the end of the year?