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In a Missouri circuit court, Kleen was convicted of issuing an insufficient funds check. He appealed, pointing out that he had merely signed a blank check form in Missouri and then given the form to his truck driver. The truck driver carried the signed blank check form to Memphis, Tennessee, where someone at the Herring Sales Company filled in the company name as the payee and also filled in the amount. Herring kept the check in return for a truckload of meal that was transported by Kleen’s truck and driver back to Kleen’s business in Nevada, Missouri. Kleen therefore contended that even though the check was drawn on the Citizen’s Bank of Nevada, the alleged criminal act occurred in Tennessee, where the signed blank form was made a check and was issued. Consequently, Missouri had no jurisdiction, and his conviction should be overturned. You decide. (State v. Kleen, 491S.W.2d 2)
On November 10, Lee Co. began operations by purchasing coffee grinders for resale. The grinders have a 60-day warranty. When a grinder is returned, the company discards it and mails a new one from merchandise inventory to the customer. The company's cost per new grinder is $24 and its retail selling price is$50. The company expects warranty costs to equal 10% of dollar sales. The following transactions occurred.
Nov. 16 Sold 50 grinders for $2,500 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 12 Replaced six grinders that were returned under the warranty. 18 Sold 200 grinders for$ 10,000 cash. 28 Replaced 17 grinders that were returned under the warranty, 31 Recognized warranty expense related to December sales with an adjusting entry. Jan. 7 Sold 40 grinders for $2,000 cash. 21 Replaced 36 grinders that were returned under the warranty, 31 Recognized warranty expense related to January sales with an adjusting entry.
Prepare journal entries to record these transactions and adjustments.
How much warrunty expense is reported for November and for December?
How much warranty expense is reported for January?
What is the balance of the Estimated Warranty Liability account as of December 31?
What is the balance of the Estimated Warranty Liability account as of January 31?
Laughlin Horse Farms, Inc., began 2016 with cash of $190,000. During the year, Laughlin earned service revenue of$591,000 and collected $570,000 from customers. Expenses for the year totaled$425,000, with $410,000 paid in cash to suppliers and employees. Laughlin also paid$137,000 to purchase equipment and a cash dividend of $45,000 to stockholders. During 2016, Laughlin borrowed$24,000 by issuing a note payable. Prepare the company’s statement of cash flows for the year ending December 31, 2016. Format operating activities by the direct method.