Lafayette Corporation, a client, requests that you compute the appropriate balance of its estimated liability for product
Question:
Percentage of Total
Month Following Sale Returns Expected
First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%
Second . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Fourth through sixth10% each month . . . . . . . . . . . . . . . . . 30
100%
Gross sales of components were as follows for the first six months of 2011:
The corporations warranty also covers the payment of freight cost on defective components returned and on the new components sent out as replacements. This freight cost runs approximately 5% of the sales price of the components returned. The manufacturing cost of the components is roughly 70% of the sales price, and the salvage value of returned components averages 10% of their sales price. Returned components on hand at December 31, 2010, were thus valued in inventory at 10% of their original sales price. Instructions: Using the data given, prepare a schedule for arriving at the balance of the estimated liability for product warranty account as of June 30, 2011, and give the proposed adjustingentry.
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen