Roberts Company Is Preparing Monthly Adjusting Entries at December 31

question 13

Essay

Roberts Company is preparing monthly adjusting entries at December 31. An analysis reveals the following:
1. During December, Roberts Company sold 3,000 units of a product that carries a 60-day warranty. The sales for this product totaled $100,000. The company expects 4% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $20.
2. The company has been sued by a disgruntled employee. Legal counsel believes that it is reasonably possible that the company will have to pay $200,000 in damages.
3. The company has been named as one of several defendants in a $400,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.
4. Employees earn vacation pay at a rate of 1 day per month. During December, ten employees qualify for vacation pay. Their average daily wage is $80 per employee.
Instructions
Prepare adjusting entries, if required, for each of the four items.

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Definitions:

Failure

The lack of success in achieving a desired outcome or meeting a set objective.

Negotiated Rule Making

Occurs when an agency that is about to create a new rule or revise existing rules enters into a cooperative process by which all parties affected by the rule have a chance to shape the final form that the rule will take.

Agencies

Organizations or bodies, either government or private, established to provide specific services or enforce regulations.

Advisory Verdict

A non-binding judgment provided by a jury to guide a judge in making a final verdict, often used in complex cases or in civil law systems.