A Company Sells Tablet Computers for $1,300 Each

question 107

Essay

A company sells tablet computers for $1,300 each. The price includes a two-year warranty. During the current year, the company sells 400 tablets. On the basis of past experience, the warranty repair costs are estimated to be $280 per tablet. The actual warranty costs (paid in cash) by the company during the current year were $65,000. Prepare general journal entries to record the (a) estimated warranty expense and (b) warranty repair costs during current year.

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Definitions:

Equilibrium Quantity

The amount of products or services available and sought after at the equilibrium price, a point where the supply and demand in the market equalize.

Price Ceilings

Government-imposed limits on how high a price can be charged for a product or service.

Market Equilibrium

The condition in which market supply equals market demand, such that prices become stable.

Increased Demand

Describes a situation where a larger number of consumers are willing and able to purchase a good or service at a given price, often leading to higher prices or a market shortage if supply does not increase correspondingly.