During Its First Year of Operations, Choy Limited Had Sales

question 45

Essay

During its first year of operations, Choy Limited had sales of $765,000.The company offers a 2-year limited warranty on all sales and expects that warranty costs for the first year will average 0.5% of sales with an additional 1.5% in the second year.During the current year the company spent $12,000 on warranty repairs.
Required:
A) Prepare all journal entries related to the warranty for the current year.
B) How would the warranty liability be reported on the company's year-end balance sheet?

• A) Prepare all journal entries related to the warranty for the current year.
• B) How would the warranty liability be reported on the company's year-end balance sheet?

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Definitions:

Developed Countries

Countries with strong economies and advanced technological infrastructure relative to other less industrialized nations.

Underdeveloped Countries

Nations characterized by low levels of economic productivity, poor infrastructure, and limited access to basic needs and services for their populations.

Colonial Past

Refers to the period of history when various European nations established, exploited, and maintained colonies in other regions of the world.

Prosperous Country

A nation characterized by economic growth, high standards of living, and general well-being among its citizens.