Chapter 13 - Test Bank 201 - Required 1 Prepare journal...

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137. In 2013, Cap City Inc. introduced a new line of televisions that carry a two-year warranty against manufacturer's defects. Based on past experience with similar products, warranty costs are expected to be approximately 1% of sales during the first year of the warranty and approximately an additional 3% of sales during the second year of the warranty. Sales were $6,000,000 for the first year of the product's life and actual warranty expenditures were $29,000. Assume that all sales are on credit.
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Unformatted text preview: Required: 1. Prepare journal entries to summarize the sales and any aspects of the warranty for 2013. 2. What amount should Cap City report as a liability at December 31, 2013? AACSB: Analytic AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 13-06 Demonstrate the appropriate accounting treatment for contingencies; including unasserted claims and assessments. Topic: Accounting for contingencies...
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