P13-7 - P13-7 A) Expense warranty accrual method 1) Cash...

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P13-7 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 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
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This note was uploaded on 01/08/2010 for the course ACC 551 taught by Professor None during the Spring '09 term at Ill. Chicago.

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P13-7 - P13-7 A) Expense warranty accrual method 1) Cash...

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