ACCT 301B Fall 2010 Midterm Examination--closed books and notes 1Professor Paul Sheldon Foote, California State University, Fullerton1 During Year 1, Brunei Co. introduced a new product carrying a 2-year warranty against defects. Theestimated warranty costs related to dollar sales are:3% within 12 months following the sale and5% in the second 12 months following the saleSales and actual warranty expenditures for the years ended December 31, Year 1 and Year 2, are asfollows:SalesActual Warranty ExpendituresYear 1200,0003,000Year 2300,0008,000500,00011,000Required:What amount should Brunei report as estimated warranty liability in its December 31,Year 2, balance sheet?29,000 $__________________________________________________________Required supporting computations to receive credit for correct answers:Estimated Liability for Warranties for Year 1 Sales16,000 Estimated Liability for Warranties for Year 2 Sales24,000 Total credits to Estimated Liability account40,000 Actual Warranty Expenditures, Year 13,000Actual Warranty Expenditures, Year 28,000Total debits to Estimated Liability account11,000Estimated Liability for Warranties, December 31, Year 229,000 2 Scotia, Inc. has notes payable due June 15, Year 2 in the amount of2 million dollars.At the financial statement date of December 31, Year 1, Scotia signed an agreement to borrow torefinance the notes payable on a noncurrent basis up to:2 million dollars.The financing agreement called for borrowings not to exceed 85% of the value of thecollateral Scotia was providing. At the date of issue of the December 31, Year 1, financial statements, the value of the collateral was2.3 million dollars and was not expected to fallbelow this amount during Year 2.
This is the end of the preview.
access the rest of the document.