King Sales Sells a Certain Product for $20,000 $\quad$ 35,000
Warranty Revenue

question 121

Multiple Choice

King Sales sells a certain product for $20,000. Included in this price is an implied service contract of $600. Fifty machines were sold in 2014. Warranty expense incurred during 2014 amounted to $35,000. The company uses the sales warranty accrual method. Which entry would probably not be made in 2014?

• A) Unearned Warranty Revenue \(\quad \)35,000
• Warranty Revenue \(\quad \)35,000
• B) Cash \(\quad \)\(\quad \)1,000,000
• Sales \(\quad \)\(\quad \)970,000
• Unearned Warranty Revenue \(\quad \)\(\quad \)30,000
• C) Cash \(\quad \)\(\quad \)30,000
• Warranty Revenue \(\quad \)\(\quad \)30,000
• D) Warranty Expense\(\quad \)\(\quad \) 35,000
• Cash \(\quad \)\(\quad \)\(\quad \)35,000

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Definitions:

Ending Balance

The final amount in an account at the end of a reporting period after all debits and credits have been accounted for.

Minimum Legal Capital

The least amount of capital that must be raised through the issue of shares for a corporation to be legally established.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer.

Premium Capital

Capital that is obtained or raised at a value above its nominal or face value, often reflecting the additional amount paid by investors over the par value of securities or shares.