Commander Appliance Store Prepares Annual Financial Statements

question 51

Essay

Commander Appliance Store prepares annual financial statements.At December 31,2019.Commander needs to analyze the following items to determine the whether adjusting entries are required for 2019.
1.Twenty-two employees worked during 2019 and each of them will take two weeks of vacation in 2020.Twelve of these employees earn $500 per week and 10 employees earn $800 per week.(If an adjusting entry is required,ignore payroll taxes on this item. )
2.Office rent for January,2020 has not yet been paid.
3.Commander sold 3,000 coffee brewing machines for total sales of $150,000.Commander expects that 30 machines will need warranty repairs in the next two years and estimates the cost of repairs to be $2,400.
4.Commander has been sued by a customer and assesses the probability of losing the lawsuit to be reasonably possible.The estimate of the contingency loss is $20,000.
For each item listed,determine whether there should be an accrual and adjusting entry at December 31,2019.If so,then prepare the adjusting entry.If not,state the reason for not accruing a liability.

---

Definitions:

Successive Unit

The next unit or piece in a series or sequence, often used in the context of production or consumption.

Framing Effect

The cognitive bias where people's decisions are influenced by the way information is presented rather than the information itself.

Relatively Cheap

A term used to describe goods or services that are considered to be priced lower than their perceived value or compared to alternative options.

Prospect Theory

A psychological theory that describes how people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known.