Reference no: EM132617107

Questions -

Q1. On July 8, Compusoft receives $250,000 from a customer toward a cash sale of $1 million for customized computer equipment to be completed on August 1. The remaining $750,000 payment is received upon delivery of the product on August 1. The equipment had a totalproduction cost of $700,000. What journal entries should Compusoft record on July 8 and August 1? Assume Compusoft uses the perpetual inventory system.

Q2. During November, Wireless, Inc. makes a $1,600 credit sale. The state sales tax rate is 5% and the local sales tax rate is 1.5%. Record sales revenue and sales tax payable.

Q3. Rotary Tools sells power tools and backs each product it sells with a one-year warranty against defects. Based on previous experience, the company expects warranty costs to be approximately 5% of sales. By the end of the first year, sales and actual warranty expenditures are $800,000 and $13,000, respectively.

1. Does this situation represent a contingent liability? Why or why not?

2. Record warranty expense and warranty liability for the year based on 5% of sales.

3. Record the reduction in warranty liability and the reduction in cash of $13,000 incurred during the year.

4. What is the balance in the Warranty Liability account after the entries in parts 2 and 3?