Reference no: EM132731079
Question - Ravens Machinery Co. manufactures equipment to a very high standard of quality; however, it must still provide a warranty for each unit sold, and there are instances where the machines do require repair after they have been put into use. Ravens started in business in 2020, and as the controller, you are trying to determine whether to use the assurance-type or service-type warranty approach to measure the warranty obligation. You would like to show the company president how this choice would affect the financial statements for 2020 and advise him of the better choice. Keep in mind that the service approach is consistent with IFRS, and that there are plans to take Ravens public in a few years.
You have determined that sales on account for the year were 1,000 units, with a selling price of $3,000 each. Ignore any cost of goods sold. The warranty is for two years, and the estimated warranty cost average $200 per machine. Actual costs of servicing warranties for the year were $105,000. Yu have done some research and determined that, if the service approach were to be used, the portion of revenue allocated to the warranty portion of the sale would be $350 per unit. Because the costs of servicing warranties are not incurred evenly, warranty revenues are recognized based on the proportion of costs incurred out of the total estimated costs.
Instructions -
a. For both the assurance-type and the service approaches, prepare the necessary journal entries to record all the transactions described, and determine the warranty liability and expense amounts for 2020. Round all values to the nearest dollar. Payments for completed warranty repairs are paid in cash.
b. What are the advantages and the disadvantages of the two choices? (4 marks) What do you think is the best choice in this situation? Why?
|
Compute what is gross profit to be recognized
: December 31, 2019, to complete the contract is $1,200,000. Altom was billed $600,000 under the contract. What is gross profit to be recognized?
|
|
Demonstrate the entire revenue cycle
: Your diagram (flowchart!) should completely demonstrate the entire revenue cycle (EITHER choose Inpatient or Outpatient - you don't need both).
|
|
Prepare the tax effect journal entries for the independent
: Prepare the tax effect Journal Entries for the independent situations and explain why each gives rise to a Deferred Tax Asset or a Deferred Tax Liability
|
|
What is the best possible scenario in terms of controlling
: With regards to the order of hierarchy of control, what is the best possible scenario in terms of controlling risk?
|
|
Determine the warranty liability and expense amounts
: Prepare the necessary journal entries to record all the transactions described, and determine the warranty liability and expense amounts for 2020
|
|
What local and regional association is closest to you
: For students in the Health Science program investigate local associations which apply to your healthcare discipline. Find what local/regional association.
|
|
Evaluations on entrepreneurial behaviors
: Based on your evaluations on entrepreneurial behaviors, summarize your confidence, risk tolerance, interpersonal relationship skills
|
|
What is attribute sampling
: Why auditors use sampling in their work? What is Attribute Sampling? Discuss its salient features and where it is used using a suitable example.
|
|
How csr could affect the stakeholders decision making
: Please explain, why ethical behaviour is necessary in the practice of profession and in the business?
|