p13-13 sneha

p13-13 sneha - 1. Christine Agazzi Corporation Balance...

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1. Christine Agazzi Corporation Balance Sheet A possible error in the recognition of expenses regarding warranties on a new line of dishwashers violates GAAP. Warranties are considered loss contingencies. The accounting treatment related concerning obligations related to product warranties and product defects are usually accrued. Below are the proper journal entries to correct the financial statements that conform to GAAP. Cash or Accounts Receivable 50,000,000 (100,000 units x $500) Sales 50,000,000 Warranty Expense 2,500,000 Estimated Liability under Warranties 2,500,000 Estimated Liability under Warranties 1,000,000 Cash 1,000,000 Shouldn’t warranty expense be 1,000,000 as stated in the problem. Then the adj entry is Cr (Cash-since it was paid out) for 1,000,000 Then Estimated Liability under warranty by 1,500,000 since actual is $25 per dishwasher, $25*100,000=2,500,000-1,000,000 already paid is 1,500,000. In addition the adj entry to that is Db Warranty Expense 1,500,000 So it would look like this
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p13-13 sneha - 1. Christine Agazzi Corporation Balance...

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