Reference no: EM133077303

Question 1 - Wildhorse Co. sells remote control airplane engines, which carry a one-year warranty. If a customer brings in a defective engine, he replaces the engine with a new one from his inventory. Wildhorse estimates that 2% of units sold will be defective. As at January 1, the Warranty Liability had a credit balance of $400. Wildhorse provided the following information for his year end of December 31.

Cost per engine $145

Total sales 1,070 units

Actual warranty costs $1,160

Required -

1. Calculate the estimated warranty expense for the year.

2. Prepare the journal entry for the estimated warranty expense for the year.

3. Prepare the journal entry to record the actual warranty costs for the year.

4. Calculate the balance in the warranty liability account at the end of the year.

Question 2 - Carleton Foodmart (CF) operates in the province of Ontario, where the HST rate is 13%. CF uses a perpetual inventory system. Transactions for the business in the month of November 2021 are shown below:

Nov 1 Paid November store rent to the landlord. Monthly rent payments are $6,200 plus HST.

Nov 14 Purchase merchandise inventory on account from various suppliers. The merchandise cost $4,100 plus HST.

Nov 17 Sold merchandise on account to various customers totaling $10,500 plus HST. The cost of the merchandise to CF was $5,425.

Required -

1. Prepare the journal entries to record these transactions on the books of Carleton Foodmart.

2. Calculate the balance in the HST Payable account at the end of November.

3. Calculate the balance in the HST Recoverable account at the end of November.

4. How much will Carleton Foodmart owe to the Receiver General when they file their next HST return?