12(b) Flashcards
Big Bear barbecue Company sold 200 smokers during 2025 for $1700 each together with the one year warranty warranty claims are estimated to be $150 per smoker. Actual warranty claims on the smoker in 2025 or $12,550. actual warranty claims on the smokers in 2026 or $18,500. What amount of warranty liability would big bear report at December 31, 2025?
$17,450
Palmer frosted flakes company offers its customers a pottery cereal bowl if they sent in three proof of purchase seals from Palmer frosted flakes boxes in one dollar. The company estimates that 60% of the proof of purchase seals will be redeemed. In 2026, the company sold 1,350,000 boxes of frosted flakes, and customers redeemed 660,000 proof of purchase seals receiving 220,000 balls.If the balls cost Palmer company three dollars each, how much liability for outstanding premium should be recorded at the end of 2026?
$100,000
what is a characteristic of assurance type warranty but not a service type warranty?
Warranty liability
accompany offers a cash rebate of $1 on each $4 package of lightbulbs. It sells during 2026. Historically 10% of customers mail in the rebate form. 2026, 3,750,000 packages of lightbulbs were sold, in 200,000 $1 rebates are mailed to customers. What are the rebate expense and liability, respectfully, shown on the 2026 financial statements?
$375,000; $175,000
in 2024, salt and Co. introduced a new line of machines that carry a three-year warranty against manufacturers defects. Based on industry experience, warranty costs are estimated at one percent of sales in the year of the sale, 2% of the year after the sale, and 3% in the second year after the sale. Sales and actual warranty exposures for the first three year period were as follows: sales for 2024 were $1,400,000, 2025 $1,000,000 in 2026 $1,400,000 and actual warranty expenditures for 2024 $26,000, 2025, $40,000 and 2026 $90,000. What amount should salt and report as warranty liability at December 31, 2026?
$72,000
Vitali Italian food company offers its customers a pizza wheel cutter if they send in for proof of purchase seals from its frozen pizza boxes in one dollar. The company estimates at 60% of the purchase seals will be redeemed. In 2026, the company sold 800,000 frozen pieces and customers redeemed 352,000 proof of purchase seals receiving 88,000 pizza wheel cutters. If the pizza wheel cutters cost two dollars each, how much liability for outstanding premiums should be reported at the end of 2026?
$64,000
The current maturing portion of long-term debt should be classified as a current liability if
The debt will be liquidated within one year, using funds currently classified as current assets
Sand shoes for Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determine that it is possible that they may lose the case. The attorneys estimate estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be $800,000. What is the required journal entry as a result of this litigation?
No journal entry is required
composite provides extended service contracts and electronic equipment sold through major retailers. The standard contract is for four years. During the current year, composite provided 42,000 such warranty contracts at an average price of $162 each. The company spent $800,000 servicing the contracts during the current year and expects to spend $4,200,000 more in the future.What is the net profit of the company will recognize in the current year related to these contracts?
$901,000
on January 3, 2026, Benton Corp. owned a machine company that had a cost of $400,000. The accumulated depreciation was $240,000, the estimated salvage value was $24,000, and fair value was $640,000. on January 4, 2026 this machine was irreparably damaged by pogo Corp. and became worthless. In October 2026, a court awarded damages of $480,000 against pogo in favor of Benton. A December 31, 2026 the final outcome of this case was awaiting appeal and was therefore uncertain. However, in the opinion of Ben’s attorney, pogos appeal will be denied. December 31, 2026, what amount Bentley crew for this gain contingency?
$0
common facts high-end whole home electronic systems. The company provides a one year warranty for all products sold. The company estimates that the warranty cost is $300 per unit sold and reported liability for estimated warranty cost of $10.4 million at the beginning of the current year. If during the current year, the company sold 60,000 units for a total of 324 million and pay warranty claims of $12 million on current prior to your sales, what amount of liability with the company report on its balance sheet at the end of the current year?
$16,400,000
Yurman Co. sells major household, appliance service contracts for cash. The service contracts are for a one year, two year, or three year period. Cash receipts from contracts are credited to unearned service contract revenues. This account had balance of $960,000 at December 31, 2024 before year end adjustment. Service contracts cost are charged as incurred to the service content expense account, which had a bounce of $240,000 at December 31, 2024. outstanding service contracts at December 31, 2024 expire as follows: 2025 - $200,000, 2026 - $320,000 and 2027 - $140,000. what amount should be reported as unearned service contract for revenues in Yermans December 31, 2024 balance sheet?
$660,000
A loss contingency should be accrued when
The amount of the loss can be reasonably estimated, and it is probable that it asset has been impaired or liability has been incurred.
