P12-7 - Accrued payroll (200*(650/2)) 65,000 C) The first...

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P12-7 A) Expense warranty accrual method 1) Cash 4,810,000 Sales ($7400*650) 4,810,000 2) Warranty Expense 120,250 Inventory (170*(650/2)) 55,250 Accrued payroll (200*(650/2)) 65,000 3) Warranty Expense 120,250 Estimated Liability under warranties 120,250 4) Estimated Liability under warranties 120,250 Inventory (170*(650/2)) 55,250 Accrued payroll (200*(650/2)) 65,000 B) cash basis method 1) Cash 4,810,000 Sales 4,810,000 2) Warranty Expense 120,250 Inventory (170*(650/2)) 55,250 Accrued payroll (200*(650/2)) 65,000 3)  We cannot record it until it is expensed in 2009.  4) Warranty Expense 120,250 Inventory (170*(650/2)) 55,250
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Unformatted text preview: Accrued payroll (200*(650/2)) 65,000 C) The first method of "Expense warranty accrual" discloses future warranty payments. D) Expense warranty accrual method is the actual closest to the actual income since it is stated that "It is the generally accepted method and should be used whenever the warranty is an integral and inseparable part of the sale and is viewed as a loss contingency." Basically the warranty is part of the sales, therefore should be recorded in the year the sale is made....
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