In 2023 Alberta Electric Bike Co. (AEB) began selling electric bicycles for $$1,500. A complete 5-year...

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In 2023 Alberta Electric Bike Co. (AEB) began selling electric bicycles for $$1,500. A complete 5-year warranty covering parts and labor is included in the price. On January 2, 2023, AEB sold 400 bicycles. The company estimates that warranty repair costs on these bicycles will amount to 2% of sales revenue for each year over the 5-year warranty period. In addition, customers have the option to buy an additional 2 years of warranty coverage for $600. 80 % of the customers chose the extra warranty coverage. The company estimates that 50% of bicycles covered by the extended warranty will need repairs costing an average of $200 for parts and $200 for labor. Repairs made under the extended warranty would occur evenly over the years 2028 and 2029. In 2023 Alberta Electric Bike Co. paid $6,000 for parts and $9,000 for labor to repair bicycles under warranty. In 2028, the company spent $38,000 for parts and $52,000 for labor to repair bicycles sold under the extended warranty. REQUIRED: A. Using the above data, prepare ALL journal entries for 2023. B. Show the proper Balance Sheet presentation on December 31, 2023, for ALL the warranty-related accounts. C. In 2025, AEB discovered that the actual warranty repair costs are far greater than the original estimated repair costs. Briefly comment on what the accounting impact would be for 2023 and 2024. D. Prepare ALL necessary journal entries for 2028. In 2023 Alberta Electric Bike Co. (AEB) began selling electric bicycles for $$1,500. A complete 5-year warranty covering parts and labor is included in the price. On January 2, 2023, AEB sold 400 bicycles. The company estimates that warranty repair costs on these bicycles will amount to 2% of sales revenue for each year over the 5-year warranty period. In addition, customers have the option to buy an additional 2 years of warranty coverage for $600. 80 % of the customers chose the extra warranty coverage. The company estimates that 50% of bicycles covered by the extended warranty will need repairs costing an average of $200 for parts and $200 for labor. Repairs made under the extended warranty would occur evenly over the years 2028 and 2029. In 2023 Alberta Electric Bike Co. paid $6,000 for parts and $9,000 for labor to repair bicycles under warranty. In 2028, the company spent $38,000 for parts and $52,000 for labor to repair bicycles sold under 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 the warranty-related accounts. C. In 2025, AEB discovered that the actual warranty repair costs are far greater than the original estimated repair costs. Briefly comment on what the accounting impact would be for 2023 and 2024. D. Prepare ALL necessary journal entries for 2028.

Answer rating: 100% (QA)

A Journal entries for 2023 Jan 2 2023 Cash 600000 400 bikes x 1500 per bike Sales Revenue 600000 ... View the full answer