Old Hampton Company Is Preparing Adjusting Entries at December 31

question 199

Essay

Old Hampton Company is preparing adjusting entries at December 31. An analysis reveals the following:
1. During December Old Hampton Company sold 3000 units of a product that carries a 60-day warranty. The sales for this product totaled $100000. 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 $15.
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 $200000 in damages.
3. The company has been named as one of several defendants in a $400000 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 $90 per employee.
Instructions
Prepare adjusting entries if required for each of the four items.

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Definitions:

Colonization Of Texas

The process in the 19th century by which settlers from the United States and other countries moved into the Mexican territory of Texas, leading to its eventual annexation by the U.S.

Mexican Government

The federal republic government of Mexico, consisting of an executive branch led by the President, a legislative branch, and a judicial branch.

American Citizens

Individuals who hold citizenship in the United States, either by birth or naturalization, providing them with specific rights and responsibilities.

Market Economy

A market economy in which choices about investment, production, and the allocation of goods are driven by the forces of supply and demand, with the prices of goods and services being established by a free market pricing mechanism.