Solutions to Selected Problems from the Text -- Chapter 11

# Solutions to Selected Problems from the Text -- Chapter 11...

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COMMERCE 450 FALL 2011 SOLUTIONS TO SELECTED PROBLEMS FROM THE TEXT CHAPTER 11 SOLUTIONS ARE PROVIDED TO THE FOLLOWING PROBLEMS: P11-9 P11-18 P11-22 P11-29 P11-30 P11-9. Suggested solution: 1. Dr. Warranty expense 30,000 Cr. Provision for warranty obligations 30,000 2,500 × (\$5 + \$7) = \$30,000 2. Dr. Provision for warranty obligations 6,000 Cr. Wage expense 6,000 3. The total provision for warranty obligations that will be reported at year-end is \$24,000 (\$30,000 – \$6,000). Of this amount, \$6,500 will be reported as a current obligation [(2,500 × \$5) – \$6,000 = \$6,500] and the \$17,500 balance as a non-current liability (2,500 × \$7 = \$17,500) or (\$24,000 – \$6,500 = \$17,500). * * * * * P11-18. Suggested solution: a. Dr. Cash 5,000,000 Cr. Earned revenue 5,000,000 (1,000 × \$5,000 = \$5,000,000) Dr. Cost of goods sold 4,000,000 Cr. Inventory 4,000,000 [\$5,000,000 / (1 + 25%) = \$4,000,000] Dr. Warranty expense 400,000 Cr. Provision for warranty payable 400,000

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(1,000 × \$400 = \$400,000) Dr. Provision for warranty payable 170,000 Cr. Parts inventory 50,000 Cr. Wage expense 120,000 b. Dr. Cash 5,000,000 Cr. Earned revenue 5,000,000 (1,000 × \$5,000 = \$5,000,000) Dr. Cost of goods sold 4,000,000 Cr. Inventory 4,000,000 [\$5,000,000 / (1 + 25%) = \$4,000,000] Dr. Warranty expense 170,000 Cr. Parts inventory
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## This note was uploaded on 12/10/2011 for the course COMM 450 taught by Professor Jackes during the Spring '10 term at UBC.

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Solutions to Selected Problems from the Text -- Chapter 11...

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