Big Dots Provides a One-Year Warranty with All Its Products

question 36

Essay

Big Dots provides a one-year warranty with all its products it sells.It estimates that it will sell 350,000 units of its product for the year ended December 31,2016,and that its total revenue for the product will be $105,000,000.It also estimates that 75% of the product will have no defects,5% will have major defects,and 20% will have minor defects.The cost of a minor defect is estimated to be $6 for each product repaired,and the cost for a major defect cost is about $21.The company also estimates that the minimum amount of warranty expense will be $1,500,000 and the maximum will be $6,000,000.
a.Prepare the journal entry for 2016 under the warranty.
b.Prepare the journal entry to record the sale of 600,000 cans of soup.
c.Prepare the journal entry to estimate the premium expense for 2016.
d.Prepare the journal entry to record the redemption of 180,000 labels.

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Definitions:

Stalling Objection

A type of sales objection where the customer postpones a purchase decision, often requiring additional persuasion or information.

Decision

The conclusion or resolution reached after consideration, often relating to choices in life, business, or the purchasing process.

Rephrasing

The act of expressing the same idea or message in different words to clarify meaning or to provide a new perspective.