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week 4 E13-12 - sales and any aspects of the warranty that...

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E 13-12 Warranties LO5 LO6 Cupola Awning Corporation introduced a new line of commercial awnings in 2006 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 1.5 % of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales Actual Warranty Expenditures $ 5,319,000 $ 19,946 Required: 1. Does this situation represent a loss contingency? 2. Prepare journal entries that summarize sales of the awnings (assume all credit
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Unformatted text preview: sales) and any aspects of the warranty that should be recorded during 2006. 3. What amount should Cupola report as a liability at December 31, 2006? 1. Yes 2. 2006 Sales Accounts receivable 5,319,000 Sales 5,319,000 Accrued liability and expense Warranty expense 79,785 Estimated warranty liability 79,785 Actual expenditures Estimated warranty liability 19,946 Cash, wages payable, parts and supplies, etc. 19,946 3. The liability at December 31, 2006 = $ 59,839...
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