Foster Company Is Preparing Adjusting Entries at December 31

question 165

Essay

Foster Company is preparing adjusting entries at December 31. An analysis reveals the following:
1. During December, Foster Company sold 2,000 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 $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 $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 $90 per employee.
Instructions
Prepare adjusting entries, if required, for each of the four items.

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Definitions:

Core Principles

Core principles are the fundamental beliefs or guiding truths that form the foundation for a system, organization, or individual's actions and decisions.

Public Shaming

The act of criticizing or condemning someone publicly, often through social media, for behavior deemed wrong or unacceptable by societal standards.

Legal Implications

The potential legal consequences or considerations arising from actions, decisions, or situations.

Meme

A piece of content, typically humorous, that spreads quickly online, often with slight variations.