MoTown Appliances Sells Built-In Ranges for $ 1,400 Each

question 179

Essay

MoTown Appliances sells built-in ranges for $ 1,400 each. The price includes a one-year warranty. During 2021, the company sells 1,650 ranges. On the basis of past experience, the approximately 4% of units sold will require warranty replacement at an average cost of $ 450 per unit. The actual warranty costs paid by MoTown during 2021 were $ 25,000.
Instructions
a) Prepare journal entries to record the estimated warranty expense and the warranty payments during 2021.
b) Assuming the liability has an unadjusted credit balance of $ 900, what is the 2021 adjusted liability balance?

Differentiate between implied and express warranties and their implications on sales contracts.

Identify the role and requirements of the UCC in governing sales contracts and warranties.

Analyze the statutory limitations for bringing a lawsuit under a breach of contract governed by the UCC.

Evaluate the conditions under which a warranty claim can be made or waived.

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Definitions:

Barium Enema

A diagnostic imaging test that uses a contrast material called barium to visualize the large intestine for abnormalities.

Barium Sulfate

A compound used in medical imaging to improve the contrast of X-rays and CT scans.

Rectum

The final section of the large intestine, terminating at the anus, where feces are stored before expulsion.

Colon

A part of the large intestine that absorbs water and salts from food remnants, turning them into solid waste for excretion.