3 In July 2012 the State of Arkansas filed suit against Barone seeking civil

3 in july 2012 the state of arkansas filed suit

This preview shows page 32 - 34 out of 58 pages.

that it is probable that Finley will prevail and be awarded $25 million. 3. In July 2012, the State of Arkansas filed suit against Barone, seeking civil penalties and injunctive relief for violations of environmental laws regulating hazardous waste. On February 12, 2014, Barone reached a settlement with state authorities. Based upon discussions with legal counsel, the Company feels it is probable that $13 million will be required to cover the cost of violations. Barone believes that the ultimate settlement of this claim will not have a material adverse effect on the company.4. Barone is involved in a lawsuit resulting from a dispute with a customer. On January 5, 2014, judgment was rendered against Barone in the amount of $16 million plus interest, a total of $18 million. Barone plans to appeal the judgment and is unable to predict its outcome though it is not expected to have a material adverse effect on the company.Required:141.Prepare the appropriate adjusting entry to adjust warranty expense on December 31, 2013. Show calculations. At the beginning of 2013, Scarlet Industries began offering a three-year warranty on its products. The warranty program was expected to cost Scarlet 2% of net sales, approximately equally over the three-year warranty period. Net sales made under warranty in 2013 were $270 million. Thirteen percent of the units sold were returned in 2013 and repaired or replaced at a cost of $2 million. This amount was debited to warranty expense as incurred.Required:
142.Calculate the liability that Yummy Rice should report at December 31, 2013. Yummy Rice Cereal offers an all-star bowl in exchange for three return box tops. Yummy Rice estimates that 30% will be redeemed. The bowls cost Yummy Rice $1 each. In 2013, 5,000,000 boxes of cereal were sold. By year-end 900,000 box tops had been redeemed.Required:143.Prepare a summary journal entry to record sales of the extended warranties. Also prepare any other entries associated with the warranties that should be recorded during 2013. Sunnyvale Computer Company sells a line of computers that carry a six-month warranty. Customers are offered the opportunity to buy a two-year extended warranty for an additional charge. During 2013, Sunnyvale received $320,000 from customers for these extended warranties. All sales are on credit, and funds are received evenly throughout the year and the warranties go into effect immediately after purchase.Required:144.1. Prepare journal entries that summarize the sales and any aspects of the warranty for 2013.2. Prepare journal entries that summarize the sales and any aspects of the warranty for 2014. Hardin Widget Manufacturing began operations in January 2013. Hardin sells widgets that carry a two-year manufacturer's warranty against defects in workmanship. Hardin's management projects that 2% of the widgets will require repair during the first year of the warranty while approximately 6% will require repair during the second year of the warranty. The widgets sell for $400 each. The average cost to repair a widget is $50. The company sells 60% of the widgets to retail customers who must pay a 6% sales tax. Sales and warranty information for 2013 and 2014 are as follows:2013: Sold 200 widgets on account; incurred warranty expenditures of $300.2014: Sold 300 widgets on account; actual warranty expenditures were $500.Required:

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture