Assignment 8.2 Biltrite Modules XII and XIII

(I have the excel sheets for this question already prepped if there is a way I can get them to you -- they were too big to copy in the post)

This weeks Biltrite assignment consists of two different modules related to two types of liabilities product warranty (Module XII) and note payable (Module XIII). Please read Modules XII and XIII in Biltrite Modules XII-XIII attached below.

For Module XII, please do requirements 2, 5, 6 and 7 as follows:

1. Open the file titled 2009 warranty.xls

2. Perform the tasks described in Requirement 2. Here are some hints:

a. The amount of AJE No. 1 is $2,503,060.

b. The amount of AJE No. 1 is $854,154.

c. After you enter those audit adjustments at the bottom of the schedule, the Audited Cost of Goods Sold should be $231,157,214.

3. For Requirement 5, the cells and years shown in the requirement are incorrect. The cells should be D44, E44, and F44, and the years should be 2006 2008.

4. Follow the instructions for Requirements 6 and 7

Module XII: Estimated Liability for Product Warranty

All Biltrite products are sold under a one-year warranty covering all parts and labor. Repairs are performed locally, either by the dealer who sold the bicycle or by local entities licensed as official Biltrite bicycle repair shops. Biltrite reimburses the dealers and shops for labor and parts. Reimbursement is based on work orders submitted by the repairing agency. The customer signs the work orders, and the serial number of the product repaired also appears on each work order. Defective parts or products replaced must be returned with the accompanying work order. The parts and products are received and logged in on color-coded receiving reports designed for returns. At the end of each month, the following standard journal entry is posted as an adjustment to the estimated product warranty. 8330 Product Warranty Expense 2070 Estimated Product Warranty Liability For 2009, the company applied 0.5% to the cost of goods sold in determining the amount of the monthly adjustment. Debits to account 2070 are for reimbursements and for product and parts replacements. Defective parts and products are zero-valued and placed in the rework department. Derick has asked you to analyze product warranty and determine the appropriate balance in the liability account. He has already provided you with a partially completed document and a client-prepared analysis of returns over the past four years. You have completed the document and are now ready to evaluate the adequacy of the balance.

Requirements

2) Scroll to the bottom of WP 20 and enter audit adjustments already made in previous modules that affect the cost of goods sold for 2009. You should identify the following adjustments. (If you werent assigned the respective modules, ask your instructor for details regarding amounts and accounts.) AJE No. 1 (Module IV correction of repairs expense capitalized as factory equipment); and AJE No. 3 (2009 purchase recorded in 2010, detected in completing Module VI).

5) Enter equations in cells C44, D44, and E44 that will calculate the percentage of warranty claims to the cost of goods sold for each of the three years 20042006.

6) Note the percentage that now appears in cell B46 and the resulting adjustment to product warranty expense.

7) Draft AJE No. 12 on the document