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Question: On November 10, Lee Co. began operations


On November 10, Lee Co. began operations by purchasing coffee grinders for resale. The grinders have a 60-day warranty. When a grinder is returned, the company discards it and mails a new one from merchandise inventory to the customer. The company’s cost per new grinder is $24 and its retail selling price is $50. The company expects warranty costs to equal 10% of dollar sales. The following transactions occurred.
Nov. 16 Sold 50 grinders for $2,500 cash.
30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 12Replaced six grinders that were returned under the warranty.
18 Sold 200 grinders for $10,000 cash.
28 Replaced 17 grinders that were returned under the warranty.
31 Recognized warranty expense related to December sales with an adjusting entry.
Jan. 7 Sold 40 grinders for $2,000 cash.
21 Replaced 36 grinders that were returned under the warranty.
31 Recognized warranty expense related to January sales with an adjusting entry.
Required
1. Prepare journal entries to record these transactions and adjustments.
2. How much warranty expense is reported for November and for December?
3. How much warranty expense is reported for January?
4. What is the balance of the Estimated Warranty Liability account as of December 31?
5. What is the balance of the Estimated Warranty Liability account as of January 31?


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> Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $43,500. The machine’s useful life is estimated at 10 years, or 385,000 units of product, with a $5,000 salvage value. During its secon

> Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $43,500. The machine’s useful life is estimated at 10 years, or 385,000 units of product, with a $5,000 salvage value. During its secon

> Rodriguez Company pays $395,380 for real estate with land, land improvements, and a building. Land is appraised at $157,040; land improvements are appraised at $58,890; and the building is appraised at $176,670. Allocate the total cost among the three as

> Cala Manufacturing purchases land for $390,000 as part of its plans to build a new plant. The company pays $33,500 to tear down an old building on the lot and $47,000 to fill and level the lot. It also pays construction costs of $1,452,200 for the new bu

> Rizio Co. purchases a machine for $12,500, terms 2∕10, n∕60, FOB shipping point. Rizio paid within the discount period and took the $250 discount. Transportation costs of $360 were paid by Rizio. The machine required mounting and power connections costin

> A building is acquired on January 1 at a cost of $830,000 with an estimated useful life of eight years and salvage value of $75,000. Compute depreciation expense for the first three years using the double- declining-balance method.

> Park Company reports interest expense of $145,000 and income before interest expense and income taxes of $1,885,000. (1) Compute its times interest earned. (2) Park’s competitor’s times interest earned is 4.0. Is Park in a better or worse position than i

> Selected accounts from Russel Co.’s adjusted trial balance for the year ended December 31 follow. Prepare the liabilities section of its classified balance sheet.

> Huprey Co. is the defendant in the following legal claims. For each of the following separate claims, indicate whether Huprey should (a) record a liability, (b) disclose in notes, or (c) have no disclosure. 1. Huprey can reasonably estimate that a pendin

> Refer to the transactions in Problem C-5A. Assume that although Selk owns 20% of Kildaire’s outstanding stock, circumstances indicate that it does not have a significant influence over the investee. Required Prepare journal entries to record the precedin

> Riverrun Co. provides medical care and insurance benefits to its retirees. In the current year, Riverrun agrees to pay $5,500 for medical insurance and contribute an additional $9,000 to a retirement program. Record the entry for these accrued (but unpai

> Check the Social Security Administration website (SSA.gov) to locate the Social Security office near you. Visit the office to request personal earnings and estimate form. Fill out the form and mail according to the instructions. You will receive a statem

> Review the chapter’s opening feature about Beto Perez and Zumba. Assume the company is considering expanding to Europe and that the current abbreviated income statement appears as follows. Assume also that the company currently has no i

> Assume that your team is in business and you must borrow $6,000 cash for short-term needs. You have been shopping banks for a loan, and you have the following two options. A. Sign a $6,000, 90-day, 10% interest-bearing note dated June 1. B. Sign a $6,000

> Access the February 22, 2019, filing of the December 31, 2018, annual 10-K report of McDonald’s Corporation (ticker: MCD), which is available from SEC.gov. Required 1. Identify the current liabilities on McDonald’s balance sheet as of December 31, 2018.

> Dusty Johnson is the accounting and finance manager for a manufacturer. At year-end, he must determine how to account for the company’s contingencies. His manager, Tom Pretti, objects to Johnson’s proposal to recognize an expense and a liability for warr

> Cameron Bly is a sales manager for an automobile dealership. He earns a bonus each year based on revenue from the number of autos sold in the year less related warranty expenses. Actual warranty expenses have varied over the prior 10 years from a low of

> Refer to Samsung’s balance sheet in Appendix A. List Samsung’s current liabilities as of December 31, 2018.

> Refer to Apple’s balance sheet in Appendix A. What is the amount of Apple’s accounts payable as of September 29, 2018?

> What is the combined amount (in percent) of the employee and employer Social Security tax rate? (Assume wages do not exceed $132,900 per year.)

> Selk Steel Co., which began operations in Year 1, had the following transactions and events in its long- term investments. Year 1 Jan.5 Selk purchased 60,000 shares (20% of total) of Kildaire’s common stock for $1,560,000. Oct. 23 Kildaire declared and

> Chavez Co.’s salaried employees earn four weeks’ vacation per year. Chavez estimated and must expense $8,000 of accrued vacation benefits for the year. (a) Prepare the December 31 year-end adjusting entry for accrued vacation benefits. (b) Prepare the en

> Comparative figures for Samsung, Apple, and Google follow. Required 1. Compute the times interest earned ratio for the most recent two years for Samsung using the data shown. 2. Is the change in Samsung’s time’s intere

> Key figures for Apple and Google follow. Required 1. Compute times interest earned for the three years’ data shown for each company. 2. In the current year, and using times interest earned, which company appears better able to pay inter

> Use the table below and Apple’s financial statements in Appendix A to answer the following. 1. Compute times interest earned for each of the three years shown. 2. Is Apple in a good or bad position to pay interest obligations? Assume an

> Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. The following six-column table contains the company’s unadjusted trial balance as of December 31, 2020. The followin

> Review the February 26 and March 25 transactions for Business Solutions (SP 4) from Chapter 4. Feb. 26 The Company paid cash to Lyn Addie for eight days’ work at $125 per day. Mar. 25 The Company sold merchandise with a $2,002 cost for $2,800 on credit t

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> Shown here are condensed income statements for two different companies (assume no income taxes). Required 1. Compute times interest earned for Ellis Company and for Seidel Company. 2. What happens to each company’s net income if sales i

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> Use the information in Problem 1-3A to prepare the current year-end balance sheet for Armani Company.

> Tavella Company’s first weekly pay period of the year ends on January 8. On that date, Tavella’s sales employees earned $34,745, office employees earned $21,225, and delivery employees earned $1,030 in salaries. The employees are to have withheld from th

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> Warner Co. entered into the following transactions involving short-term liabilities. Year 1 Apr. 22 Purchased $5,000 of merchandise on credit from Fox-Pro, terms n∕30. May 23 Replaced the April 22 account payable to Fox-Pro with a 60-day, 15%, $4,600 not

> Francisco Company has 10 employees, each of whom earns $2,800 per month and is paid on the last day of each month. All 10 have been employed continuously at this amount since January 1. On March 1, the following accounts and balances exist in its general

> Shown here are condensed income statements for two different companies (assume no income taxes). Required 1. Compute times interest earned for Miller Company and for Weaver Company. 2. What happens to each company’s net income if sales

> On October 29, Lobo Co. began operations by purchasing razors for resale. The razors have a 90-day warranty. When a razor is returned, the company discards it and mails a new one from merchandise inventory to the customer. The company’s cost per new razo

> Paloma Co. has four employees. FICA Social Security taxes are 6.2% of the first $132,900 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, for the first $7,000 paid to each employee, the company’s FUTA taxes a

> On January 8, the end of the first weekly pay period of the year, Regis Company’s employees earned $22,760 of office salaries and $65,840 of sales salaries. Withholdings from the employees’ salaries include FICA Social Security taxes at the rate of 6.2%,

> Tyrell Co. entered into the following transactions involving short-term liabilities. Required 1. Determine the maturity date for each of the three notes described. 2. Determine the interest due at maturity for each of the three notes. Assume a 360-day ye

> Nishi Corporation prepares financial statements for each month-end. As part of its accounting process, estimated income taxes are accrued each month for 30% of the current month’s net income. The income taxes are paid in the first month

> Use the information in Problem 1-3A to prepare the statement of retained earnings for Armani Company for the current year ended December 31.

> Stark Company has five employees. Employees paid by the hour earn $10 per hour for the regular 40-hour workweek and $15 per hour beyond the 40 hours per week. Hourly employees are paid every two weeks, but salaried employees are paid monthly on the last

> Lenny Florita, an unmarried employee, works 48 hours in the week ended January 12. His pay rate is $14 per hour, and his wages have deductions for FICA Social Security, FICA Medicare, and federal income taxes. He claims two withholding allowances. Comput

> At the end of the first pay period of the year, Sofia earned $4,000 of salary. Withholdings from Sofia’s salary include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $500 of federal income taxes, $160 of medica

> Use the following information from separate companies a through d to compute times interest earned. Which company indicates the strongest ability to pay interest expense as it comes due?

> Selected accounts from Lue Co.’s adjusted trial balance for the year ended December 31 follow. Prepare a classified balance sheet.

> For each separate situation, indicate whether Cruz Company should (a) record a liability, (b) disclose in notes, or (c) have no disclosure. 1. Cruz Company guarantees the $100,000 debt of a supplier. It is not probable that the supplier will default on t

> Vander Co. provides medical care and insurance benefits to its retirees. In the current year, Vander agrees to pay $9,500 for medical insurance and contribute an additional 5% of the employees’ $200,000 gross salaries to a retirement program. (1) Record

> Prepare adjusting entries at December 31 for Maxum Company’s year-end financial statements for each of the following separate transactions. 1. Employees earn vacation pay at a rate of one day per month. Maxum estimated and must expense $13,000 of accrued

> For the year ended December 31, Lopez Company implements an employee bonus program based on company net income, which the employees share equally. Lopez’s bonus expense is computed as $14,563. 1. Prepare the journal entry at December 31 to record the bon

> Analyze each of the following transactions from Exercise 9-12: (a) the copier’s sale; (b) the adjustment to recognize the warranty expense on December 31 of Year 1; and (c) the repairs that occur on January 5 of Year 2. Show each transaction’s effect on

> Mead Inc. began operations in Year 1. Following is a series of transactions and events involving its long-term debt investments in available-for-sale securities. Year 1 Jan.20 Purchased Johnson & Johnson bonds for $20,500. Feb.9 Purchased Sony notes for

> Kitty Company began operations in the current year and acquired short-term debt investments in trading securities. The year-end cost and fair values for its portfolio of these debt investments follow. Prepare the journal entry to record the December 31 y

> Hitzu Co. sold a copier (that costs $4,800) for $6,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu expects warranty costs to be 4% of dollar sales. It records warranty expense with an adjusting entry on December 31. On

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> The liabilities of Organic Foods are made up of $60,000 in notes payable as of its December 31 year-end. For those notes payable, $3,000 is due within the next year. Prepare the liabilities section of Organic Foods’s December 31 year-end balance sheet.

> Using the data in situation (a) of Exercise 9-7, prepare the employer’s September 30 journal entry to record the employer’s payroll taxes expense and its related liabilities. Round amounts to cents.

> Using the data in situation (a) of Exercise 9-7, prepare the employer’s September 30 journal entry to record salary expense and its related payroll liabilities for this employee. The employee’s federal income taxes withheld by the employer are $80 for th

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> On March 1, LGE asks to extend its past-due $1,200 account payable to Tyson. Tyson agrees to accept $200 cash and a 180-day, 8%, $1,000 note payable to replace the account payable. (1) Prepare the March 1 entry for LGE. (2) Prepare the September 27 entry

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> Sylvestor Systems borrows $110,000 cash on May 15 by signing a 60-day, 12%, $110,000 note. 1. On what date does this note mature? 2. Prepare the entries to record (a) issuance of the note and (b) payment of the note at maturity.

> Kirkland Company had no trading debt securities prior to this year. It had the following transactions this year involving trading debt securities. Aug.2 Purchased Verizon bonds for $10,000. Sep.7 Purchased Apple bonds for $35,000. 12 Purchased Mastercar

> Analyze each separate transaction from Exercise 9-2 by showing its effects on the accounting equation— specifically, identify the accounts and amounts (including + or –) for each transaction.

> 1. On July 15, Piper Co. sold $10,000 of merchandise (costing $5,000) for cash. The sales tax rate is 4%. On August 1, Piper sent the sales tax collected from the sale to the government. Record entries for the July 15 and August 1 transactions. 2. On Nov

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> Which of the following items are normally classified as current liabilities for a company that has a one-year operating cycle? 1. Portion of long-term note due in 10 months. 2. Note payable maturing in 2 years. 3. Note payable due in 18 months. 4. Accoun

> Refer to QS 10-14 and separately analyze transactions 1 and 2, involving issuance of the note and its first annual payment, by showing their effects on the accounting equation—specifically, identify the accounts and amounts (including + or −) for each tr

> On January 1, MM Co. borrows $340,000 cash from a bank and in return signs an 8% installment note for five annual payments of $85,155 each. 1. Prepare the journal entry to record issuance of the note. 2. For the first $85,155 annual payment at December 3

> On July 1, Aloha Co. exercises a call option that requires Aloha to pay $408,000 for its outstanding bonds that have a carrying value of $416,000 and a par value of $400,000. The company exercises the call option after the semiannual interest is paid the

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> Access the March 23, 2017, filing of the 10-K report of Home Depot for the year ended January 29, 2017, from SEC.gov (ticker: HD). Refer to Home Depot’s balance sheet, including its note 4 (on debt). Required 1. Identify Home Depot’s long-term liabilitie

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> Refer to the statement of cash flows for Samsung in Appendix A. For the year ended December 31, 2018, what was the amount for repayment of long-term borrowings and debentures?

2.99

See Answer