Chapter 9

Question 1

Excursion Camera Co. was organized to sell a single product that carries a 45-day warranty against defects. Engineering estimates indicate that 4% of the units sold will prove defective and require an average repair cost of $25 per unit. During Expedition’s first month of operations, total sales were 800 units; by the end of the month, 15 defective units had been repaired. The liability for product warranties at month-end should be
A:1175
B:425
C375
D800

Answer 1

B

Question 2

relevant ABC Company had sales in 2016 and 2017 of $250,000 and $375,000, respectively. ABC Company estimates warranty expenses at 3% of sales. Actual warranty expenses were $7,900 in 2016 and $10,600 in 2017. The warranty provision account had a normal balance of $2,100 at the beginning of 2016282.The journal entry to record the warranty expense in 2016 is:
A.Debit Warranty Provision 7,900; Credit Warranty expense 7,900
B.Debit Warranty expense 5,400; Credit Warranty Provision 5,400
C.Debit Warranty Provision 5,400; Credit Cash 5,400
D.Debit Warranty expense 7,500; Credit Warranty Provision

Answer 2

B