Homework - Ch 13

Homework - Ch 13 - Exercise 13-6 Requirement 1 Wages...

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Exercise 13-6 Requirement 1 Wages expense (700 x $900) . ............................................. 630,000 Liability – compensated future absences . ........... 630,000 Requirement 2 Liability – compensated future absences . ................ 630,000 Wages expense ($31 million + [5% x $630,000]) . ............. 31,031,500 Cash (or wages payable) (total) . ............................ 31,661,500
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Exercise 13-12 Requirement 1 This is a loss contingency. There may be a future sacrifice of economic benefits (cost of satisfying the warranty) due to an existing circumstance (the warranted awnings have been sold) that depends on an uncertain future event (customer claims). The liability is probable because product warranties inevitably entail costs. A reasonably accurate estimate of the total liability for a period is possible based on prior experience. So, the contingent liability for the warranty is accrued. The estimated warranty liability is credited and warranty expense is debited in 2006, the period in which the products under warranty are sold. Requirement 2 2006 Sales Accounts receivable . ........................................... 5,000,000 Sales . .............................................................. 5,000,000 Accrued liability and expense Warranty expense (3% x $5,000,000) . ........................ 150,000 Estimated warranty liability . .......................... 150,000 Actual expenditures Estimated warranty liability ±. .............................. ±± 37,500±
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Homework - Ch 13 - Exercise 13-6 Requirement 1 Wages...

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