Warranty Warranty is assurance provided to a customer by a seller. It is provided against the probable defects that might occur in a product. Warranty for a product is recognized at the time of sale being made. To determine: The amount to be reported as a liability at the end of the year.

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Chapter 13, Problem 13.12BE

To determine

Warranty

Warranty is assurance provided to a customer by a seller. It is provided against the probable defects that might occur in a product. Warranty for a product is recognized at the time of sale being made.

To determine: The amount to be reported as a liability at the end of the year.

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EXERCISE 7 Filmore Company started selling a new product that carried a 2-year warranty against defects. The warranty provides assurance that the new product will function as intended based on agreed-upon specifications. Based on past experiences with other products, the estimated warranty costs related to peso sales are computed as follows: First year of warranty 3% Second year of waranty 5% Total sales and actual warranty repairs for 2019 and 2020 are given: 2019 2020 P 4,200,000 Actual warranty expenditures 148,800 Sales P 6,960,000 180,000 REQUIRED: a.) What amount should Fillmore report as its estimated warranty liability as of December 31,2020? b.) Based on the above data, assuming that sales and repairs occur evenly throughout the year, how much would be the predicted warranty expense covering 2019 and 2020 sales still under warranty at December 31,2020?

Exercise 13-15 (Algo) Warranties; financial statement effects [LO13-5, 13-6] Cupola Awning Corporation introduced a new line of commercial awnings in 2024 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales $ 5,860,000 Actual Warranty Expenditures $ 39,750 Required: 1. Does this situation represent a loss contingency? 2. Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of the warranty that should be recorded during 2024. 3. What amount should Cupola report as a liability at December 31, 2024? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Loss contingency Does this situation represent a loss contingency? Required 3 Yes Answer is not complete. € Required 1 Required 2 >

Exercise 20-14 (Algo) Warranty expense [LO20-4] Woodmier Lawn Products introduced a new line of commercial sprinklers in 2020 that carry a one-year warranty against manufacturer’s defects. Because this was the first product for which the company offered a warranty, trade publications were consulted to determine the experience of others in the industry. Based on that experience, warranty costs were expected to approximate 3% of sales. Sales of the sprinklers in 2020 were $3,300,000. Accordingly, the following entries relating to the contingency for warranty costs were recorded during the first year of selling the product: Accrued liability and expense Warranty expense (3% × $3,300,000) 99,000 Warranty liability 99,000 Actual expenditures (summary entry) Warranty liability 45,540 Cash (or salaries payable, parts and supplies, etc.) 45,540 In late 2021, the company's claims experience was evaluated and it was determined that claims…