At the Beginning of 2012,Orendi Designs,InC

question 63

Essay

At the beginning of 2012,Orendi Designs,InC.had a balance in the Warranty Payable account of $10,500.During the year,Orendi sold several products that carried a two-year warranty for $450,000.Orendi estimated that warranty expense would be 5% of sales for the year.
a)What is the amount of warranty expense for 2012?
b)If Marianne paid warranty costs of $23,000 during 2012,what is the balance in the Warranty Payable account after the adjusting entry is made?

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Definitions:

Compounded Quarterly

The calculation of interest on the principal amount and previously earned interest on a quarterly basis.

Annuities

Financial products that provide a stream of payments over time in exchange for an initial lump sum investment.

Periodic Interest Rate

The interest rate charged or paid over a specific period of time, often less than one year, such as a month or quarter.

Annuity

A monetary scheme providing regular payment intervals to a person, often employed as a retirement income solution.