Question: Carnes Electronics sells consumer electronics that carry a 90-day manufacturers warranty. At the time of purchase, customers are offered the opportunity to also buy a

Carnes Electronics sells consumer electronics that carry a 90-day manufacturer’s warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During the year, Carnes received $412,000 for these extended warranties (approximately evenly throughout the year).

Required:
1. Does this situation represent a loss contingency? Why or why not? How should it be accounted for?
2. Prepare journal entries that summarize sales of the extended warranties (assume all credit sales) and any aspects of the warranty that should be recorded during the year.

Step by Step Solution

★★★★★

3.28 Rating (160 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Requirement 1 This is not a loss contingency An extended warranty is priced and sold separately fr... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

254-B-A-L (2753).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

Prevosti Farms and Sugarhouse pays its employees according to their job classification. The following employees make up Sugarhouse's staff: Employee Number Name and Address Payroll information A...

A food manufacturer claims that at the time of purchase by a consumer the average age of its product is no more than 120 days. In an experiment to test this claim a random sample of 36 items are...

At the time of his death in 2015, Clint had an adjusted gross estate of $6.2 million. Included in the estate is a 15% capital interest in a partnership. Clints interest is valued at $2.6 million....

Why are all tides greatest at the time of a full Moon or new Moon?

account balances. Manufacturings 2021 financial statements were issued on April 1, 2022. Accounts receivable $ 90,000 Accounts payable 46,600 15% notes, payable to bank 654,000 Mortgage note payable...

carnes electronic sells consumer electeonics that carry a 90-day manufacturer's warranty. at the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for...

Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for...

Carnes electronic sells consumer electeonics that carry a 90-day manufacturer's warranty. at the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for...

The following selected circumstances relate to pending lawsuits for Erismus, Inc. Erismus's fiscal year ends on December 31 . Financial statements are issued in March 2022. Erismus prepares its...

Please answer the question in it's entirety. Carnes Electronics sells consumer electronics that carry a 90-day manufacturer's warranty. At the time of purchase, customers are offered the opportunity...

Information technology is a rapidly changing field. Its impact on a variety of industries is sometimes difficult to quantify. Discuss how information technology in general has had an impact on the...

Cortical bone gets weaker with aging, but it turns out that diaphyseal diameters can also change with aging, particularly in males, such that the safety factor of the diaphysis is approximately...

9 ) Explicit provisions in a loan agreement that prohibit the borrower from engaging in certain activities is called A ) credit rationing. B ) restrictive covenants. C ) credit - risk analysis. D )...

On August 1, 2018, Brooke Kline established Western Realty. Brooke completed the following $39,750 transactions during the month of August: A. Opened a business bank account with a deposit of $35,000...

Jennings Inc., which uses IFRS, manufactures an X-ray machine with an estimated life of 12 years and leases it to SNC Medical Centre for a period of 10 years. The machines normal selling price is...

Zan Azlett and Angela Zesiger have joined forces to start A&Z Lettuce Products, a processor of packaged shredded lettuce for institutional use. Zan has years of food processing experience, and Angela...

On January 1, 2017, Ridge Road Company acquired 20 percent of the voting shares of Sauk Trail, Inc., for $2,700,000 in cash. Both companies provide commercial Internet support services but serve...

Hyperion, Inc., currently sells its latest high-speed color printer, the Hyper 500, for $350. It plans to lower the price to $300 next year. Its cost of goods sold for the Hyper 500 is $200 per unit,...

Consider a bond with a 10% coupon and with yield to maturity = 8%. If the bonds YTM remains constant, then in one year will the bond price be higher, lower, or unchanged? Why? (LO 10-2)

(Dollar-Value LIFO) Sisko Company has used the dollar-value LIFO method for inventory cost determination for many years. The following data were extracted from Sisko?s records. Calculate the index...

Dollar-Value LIFO The dollar-value LIFO method was adopted by King Corp. on January 1, 2010. Its inventory on that date was $160,000. On December 31, 2010, the inventory at prices existing on that...

Dollar-Value LIFO Presented below is information related to Martin Company. Compute the ending inventory for Martin Company for 2007 through 2012 using the dollar-value LIFO method. Ending Inventory...

The Stewart Company has $1,402,500 in current assets and $518,925 in current liabilities. Its initial inventory level is $308,550, and it will raise funds as additional notes payable and use them to...

Exploratory Data Analysis: The following graph shows real data on the weights and ages of a sample of black bears. You may assume the sample is a random sample of a B.C. bear population. Describe...

You own a 15 year, $1,000 par value bond paying 6 percent interest annually. The market price of the bond is required rate of return 9 percent. Compute the bonds expected late of return. Determine...