Casey Company Purchases Inventory for $100,000, Paying $40,000 in Cash

question 59

Essay

Casey Company purchases inventory for $100,000, paying $40,000 in cash and signing a 3-year, 5% note payable for the remainder. The company has $90,000 sales in the month of March and estimates that 5% of product sales will require warranty repairs. Journalize the transactions below and identify which accounts are known liabilities and which are estimated liabilities.
Inventory purchase
Sales for March (25% on account, 75% in cash).
Estimated dollars for warranties.

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Definitions:

Statute of Frauds

A legal requirement that certain types of contracts must be written and signed by the party against whom enforcement is sought.

Statute of Frauds

A legal principle that requires certain types of contracts to be in writing and signed by the parties involved to be enforceable.

Enforceable

A legal term denoting that an agreement or contract can be compelled or upheld by law.

Convention on Contracts

Refers to international agreements or treaties that set out the rules governing contracts, especially those that have cross-border implications.