In the Most Recent Year of Operations, Bradley's Video Games

question 4

Essay

In the most recent year of operations, Bradley's Video Games sold merchandise costing $25,000 for $ 75,000. All merchandise was sold under a one-year warranty. At the time of sale, Bradley estimated that warranty claims would amount to 3% of sales. During the year, Bradley replaced defective merchandise for $1,290. All transactions were cash transactions.
Required:
a. Prepare journal entries to record all transactions related to the warranty.
b. Based solely on the above information, determine Bradley's operating income for the year.

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Definitions:

Yield

The income return on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost.

Bond

A fixed-income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental, which pays periodic interest and the return of the principal at maturity.

Treasury Bill

Short-term, highly liquid government debt obligation issued at a discount from the face value and returning the face amount at maturity.

Par Value

The nominal value of a security stated by the issuer.