Midterm 3

Midterm 3 - Warranties You sell, for a total of \$96,000...

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Warranties You sell, for a total of \$96,000 computers with an inventory value of \$32,000. You provide a warranty on the computers that you estimate the cost to be 10% of sales. Dr. Cash \$96,000 Cr. Sales Revenue \$96,000 Dr. COGS \$32,000 Cr. Inventory \$32,000 Dr. Warranties Expense \$9,600 Cr. Liabilities for Warranties \$9,600 Future Value (amount accumulated including interest and principal) 5 years, 5% every 6 months = 10 periods at 2.5% Future Value of \$1, Table 9A-1 Present Value (value today of a future cash inflow or outflow) Present Value of \$1, Table 9A-2 On Jan. 1, 2006, Move-It Quick bought some new delivery trucks. The company signed a note and agreed to pay \$500,000 for the trucks on Jan. 1, 2008. Market interest rate for the note was 12% To record obligation (record present value of obligation) FV = 500,000 #of Periods = 2 Int. Rate = 12% PV = 500,000 * PV factor for 2 periods at 12% 9A-2 = \$398,597 Dr. Trucks 398,597 Cr. LT Note Payable 398,597 Record int. expense end of 2006 398,597 * 0.12 = \$47,832 Dr. Interest Expense 47,832 Cr. LT Note Payable 47,832
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This note was uploaded on 04/09/2008 for the course ACC FA taught by Professor Bartov during the Spring '08 term at NYU.

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