Chapter 13 - Test Bank 207 - AACSB Analytic AICPA FN...

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AACSB: Analytic AICPA FN: Measurement Blooms: Analyze Difficulty: 3 Hard Learning Objective: 13-05 Identify situations that constitute contingencies and the circumstances under which they should be accrued. Learning Objective: 13-06 Demonstrate the appropriate accounting treatment for contingencies; including unasserted claims and assessments. Topic: Accounting for contingencies Topic: Identify contingencies 141. At the beginning of 2013, Scarlet Industries began offering a three-year warranty on its products. The warranty program was expected to cost Scarlet 2% of net sales, approximately equally over the three-year warranty period. Net sales made under warranty in 2013 were $270
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Unformatted text preview: million. Thirteen percent of the units sold were returned in 2013 and repaired or replaced at a cost of $2 million. This amount was debited to warranty expense as incurred. Required: Prepare the appropriate adjusting entry to adjust warranty expense on December 31, 2013. Show calculations. Blooms: Apply Difficulty: 2 Medium Learning Objective: 13-06 Demonstrate the appropriate accounting treatment for contingencies; including unasserted claims and...
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  • Winter '11
  • Shirey
  • Generally Accepted Accounting Principles, 2%, $2 million, Scarlet Industries, Thirteen percent, $270 million

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