1. Given the following information, record the following journal entries and be prepared to explain your answer.

XYZ sells motorcycles directly to customers. As part of the selling price, it warrants the cycles against any manufacturing defects for one year. During 2018 it sold 1,000 of their Model XX for $1,500 per cycle. The firm estimates that warrantee expenses associated with the above-stated warranty will average $175 per cycle and that 60% of their total warranty costs would be incurred in 2018 and 40% in 2019.

1. Assume they spent $105,000 or the expected amount in 2018. Record the journal entry for these expenses that were incurred during the year.

2. The journal entry to record any remaining warranty liability on 12/31/18.

3. The journal entry that would sum up the effect of warranty compliance activities during 2019 if they expended $60,000 prior to the expiration of the warrantees in 2019

1. Given the following information, record the following journal entries and be prepared to explain your answer.

XYZ also provides extended warranties on its cycles for an additional cost of $150. During 2018 it sold 500 such warrantees to some of the customers that bought its 1,000 machines 2018. The warranty lasts for two years beginning 1/1/2020. XYZ recognizes warranty revenues on a straight-line basis.

1. 
   
   1. Record the journal entry for the sale of the warrantees in 2018 as they are sold.
2. 
   
   2. Assume that the firm spent $26,250 in service warranty expenses during 2020. Record the journal entries to recognize revenues and expenses for the service-type warranties.
3. 
   
   3. The journal entry to record any remaining warranty liability on 12/31/20.
4. 
   
   4. Record the journal entries to recognize the revenue from the service-type warranties and warrantee expenses in 2021 if they spent $22,000 on warranty expenses.
5. XYZ also offers customers a rebate on regular maintenance if the customer has their dealers perform the maintenance on their cycles in their first year of ownership. XYZ estimates that the total cost of these rebates associated with the 1,000 it sold in 2018 would be $1,200 in 2018 and $1,800 in 2019. During 2018, it gave eligible customers $1,100 in rebates.
   1. Record the journal entry for the rebates provided to customers in 2018.
6. 
   
   2. Record the journal entry on December 31, 2018, for remaining rebate liability assuming their original estimate of total rebate costs is still the best estimate.
7. 
   
   3. XYZ provided an additional $1,700 in rebates during 2019. Record the journal entry that sums up the effects of these rebates during the year and to close out the program at the end of the year.
8. XYZ had been using some land they owned as a temporary waste storage site. Their temporary permit expires on December 31, 2020 at which time they are required to restore the land to its original condition. On January 1, 2018 when they entered into the arrangement, they estimated that the cleanup costs on 12/31/20 would be $50,000. They also use an 8% discount rate for projects like this. They paid $100,000 for the 3-year lease on the land on 1/1/18 and the lease is considered a capital lease, i.e., it is capitalized and amortized. They have elected straight-line amortization.
   1. Record the journal entry on 1/1/18 that includes all the effects of this transaction.
9. 
   
   2. Record the adjusting journal entry needed on 12/31/2018.
10. 
    
    3. The completed their clean up on the property to the satisfaction of the lessor on 12/31/20 for a cost of $55,000. Record the journal entry to close out the least and their cleanup commitment.

Answer rating: 100% (QA)

A journal entry is a record of a commercial transaction in an organizations accounting system When a company buys supplies using cash for example the transaction will appear in both the supply and cas... View the full answer