Merritt Equipment Company Problem
Question # 00028504
Posted By:
Updated on: 10/17/2014 12:32 AM Due on: 10/17/2014
Merritt Equipment Company sells computers for $1,540 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2014, the company sold 930 computers. Based on past experience, the company has estimated the per unit 2-year warranty costs as $40 for parts and $60 for labor. (Assume sales all occur at December 31, 2014.)
In 2015, Merritt incurred actual warranty costs relative to 2014 computer sales of $12,000 for parts and $18,000 for labor.
Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2014 and 2015.
2014
DR:
CR:
(To record sale of computers.)
2014
DR:
CR:
(To record liability against warranty costs.)
2015
DR:
CR:
Under the cash-basis method, what are the Warranty Expense balances for 2014 and 2015?
Warranty Expense
2014 $
2015 $
In 2015, Merritt incurred actual warranty costs relative to 2014 computer sales of $12,000 for parts and $18,000 for labor.
Under the expense warranty approach, give the entries to reflect the above transactions (accrual method) for 2014 and 2015.
2014
DR:
CR:
(To record sale of computers.)
2014
DR:
CR:
(To record liability against warranty costs.)
2015
DR:
CR:
Under the cash-basis method, what are the Warranty Expense balances for 2014 and 2015?
Warranty Expense
2014 $
2015 $
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Rating:
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Solution: Merritt Equipment Company Problem