WarrantiesKim’s Athletics sells bicycles and other sports and athletic equipment. Sales and expected warranty claims for the year are as follows:ItemUnit SalesExpected Warranty Claimsfor Warranty PeriodCost per ClaimMountain bikes625 5 claims per 100 sold$40 Racing bikes150 1 claims per 15 sold90 Snowboards400 2 claim per 40 sold35 Required:1. Prepare the entry to record warranty expense for Kim's for the year. If an amount box does not require an entry, leave it blank.Dec. 31 - Select -- Select - - Select -- Select - (Record warranty expense) 2. Conceptual Connection: Why does Kim’s have to record a liability for future warranty claims?Warranties are . Therefore, companies must record and a corresponding if such contingent amounts are .

Given that, Expected Warranty Claims for Warranty Period for - Mountain bikes = 5 claims per 100…

Answered: Warranties Kim’s Athletics sells…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 71E: Warranties Eds Athletics sells bicycles and other sports and athletic equipment. Sales and expected...

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Warranties

Kim’s Athletics sells bicycles and other sports and athletic equipment. Sales and expected warranty claims for the year are as follows:

Item	Unit Sales	Expected Warranty Claims for Warranty Period	Cost per Claim
Mountain bikes	625		5 claims per 100 sold	$40
Racing bikes	150		1 claims per 15 sold	90
Snowboards	400		2 claim per 40 sold	35

Required:

1. Prepare the entry to record warranty expense for Kim's for the year. If an amount box does not require an entry, leave it blank.

Dec. 31		- Select -	- Select -
		- Select -	- Select -
	(Record warranty expense)

2. Conceptual Connection: Why does Kim’s have to record a liability for future warranty claims?

Warranties are

. Therefore, companies must record

and a corresponding

if such contingent amounts are

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