QUESTION 1 Sintok Electrical Bhd provides a 2-year warranty for its stand fan. The fan was first sold in 2019 in which the company spent cash...
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Sintok Electrical Bhd provides a 2-year warranty for its stand fan. The fan was first sold in 2019 in which the company spent cash RM30,000 for servicing warranty claims. At year-end, Sintok Electrical Bhd estimates that an additional RM50,000 will be spent in the future to service warranty claims related to 2019 sales.

Prepare Sintok Electrical Bhd's related journal entries for 2019. (Assume the company's financial year ends 31 December).

A. Nebron Computer Bhd sells computers for RM2,500, which includes a 3 year warranty that requires company to perform periodic services and to replace defective parts. During 2018, Nebron sold 500 computers by cash. The company has estimated the total 3 year warranty costs at RM250 (RM100 for labour costs and RM150 for spare parts). Assume that all the computer sales occur on 31 December 2018. In 2019, the company incurred actual warranty expense in relative to the 2018 sales of RM12,500 for parts and RM18,750 for labour costs.

(a)  Prepare the necessary journal entries for 2018 and 2019.

(b) Determine the balance of warranty liabilities as at 31 December 2019. Show your calculations.



B.       Ez-Score Bhd is involved in a lawsuit at 31 December 2018.

(a)  Prepare the 31 December entry assuming it is probable that Ez-Score Bhd will be liable for RM900,000 as a result of this suit.

(b) Prepare the 31 December entry, if any, assuming it is not probable that Ez-Score Bhd will be liable for any payment as a result of this suit.

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