Edmonton Drone Co. (EDC) began operations on January 1, 2022 (last year) by selling drones through...

 

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Edmonton Drone Co. (EDC) began operations on January 1, 2022 (last year) by selling drones through electronic retail stores. All drones come with a four-year warranty covering parts and labor. For simplicity assume all sales for each year occur on January 1. In 2022 the estimated warranty repairs were $50,000 and actual repair costs amounted to $10,000. 2023 In 2023 the company sold 500 drones for $2,000 each. Estimated warranty repairs over the 4-year period are $100 for parts and $100 for labor on average for each drone sold. In 2023 EDC spent a total of $8,000 for labor and $12,000 for parts to repair drones covered under warranty. Half of this was for drones sold in 2022 and half for drones sold in 2023. For the first time, in 2023 EDC offered customers the choice to buy an additional 3 years of warranty coverage for $800.80% of drones sold are covered by this extended warranty. The company estimates that 50% of the drones sold in 2023 will be repaired under the extended warranty, with the average cost being $200 for parts and $450 for labor on the defective drones. Repairs made under the extended warranty should occur evenly over the years 2027 to 2029. 2028 I In 2028, the company spent $18,000 for parts and $22,000 for labor to repair broken drones covered by the extended warranty. REQUIRED: A. Using the above data, prepare ALL journal entries for 2023. B. Show the proper Balance Sheet presentation on December 31, 2023, for ALL warranty-related accounts. C. In 2024, EDC finds that actual warranty repair costs are significantly MORE than estimated in previous years. Briefly comment on what effect this would have on the accounting for prior years. DO NOT COMPUTE AMOUNTS. D. Prepare the necessary journal entries for 2028 for ALL warranty-related items. Edmonton Drone Co. (EDC) began operations on January 1, 2022 (last year) by selling drones through electronic retail stores. All drones come with a four-year warranty covering parts and labor. For simplicity assume all sales for each year occur on January 1. In 2022 the estimated warranty repairs were $50,000 and actual repair costs amounted to $10,000. 2023 In 2023 the company sold 500 drones for $2,000 each. Estimated warranty repairs over the 4-year period are $100 for parts and $100 for labor on average for each drone sold. In 2023 EDC spent a total of $8,000 for labor and $12,000 for parts to repair drones covered under warranty. Half of this was for drones sold in 2022 and half for drones sold in 2023. For the first time, in 2023 EDC offered customers the choice to buy an additional 3 years of warranty coverage for $800.80% of drones sold are covered by this extended warranty. The company estimates that 50% of the drones sold in 2023 will be repaired under the extended warranty, with the average cost being $200 for parts and $450 for labor on the defective drones. Repairs made under the extended warranty should occur evenly over the years 2027 to 2029. 2028 I In 2028, the company spent $18,000 for parts and $22,000 for labor to repair broken drones covered by the extended warranty. REQUIRED: A. Using the above data, prepare ALL journal entries for 2023. B. Show the proper Balance Sheet presentation on December 31, 2023, for ALL warranty-related accounts. C. In 2024, EDC finds that actual warranty repair costs are significantly MORE than estimated in previous years. Briefly comment on what effect this would have on the accounting for prior years. DO NOT COMPUTE AMOUNTS. D. Prepare the necessary journal entries for 2028 for ALL warranty-related items.

Answer rating: 100% (QA)

A Journal Entries for 2023 1 To record estimated warranty repairs expense for 2023 Estimated Warrant... View the full answer