Exam 18: Specimen Financial Statements: Wal-Mart Stores, Inc

Marin Company sells 9,000 units of its product in 2018 for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 180 units for a total cost of $9,000. What amount will be reported on Marin Company's balance sheet as Warranty Liability on December 31, 2018?

If a contingent liability is reasonably estimable and it is reasonably possible that the contingency will occur, the contingent liability

Ryan Corporation entered into the following transactions: 1. Hewitt Car Rental leased a car to Ryan Corporation for one year. Terms of the operating lease call for monthly payments of $750. 2. On January 1, 2017, Ryan Corporation entered into an agreement to lease 20 machines from Meeks Corporation. The terms of the lease agreement require an initial payment of $210,000 and then three annual rental payments of $210,000 beginning on December 31, 2017. The present value of the three rental payments is $522,238. The lease is a capital lease. Instructions Prepare the appropriate journal entries to be made by Ryan Corporation in January related to the lease transactions.

In a lease contract,

In a finance lease, the amount capitalized is the

The accounting for warranty cost is based on the expense recognition principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense

A lease may be classified as an ______________ lease or as a ____________ lease.

Marin Company sells 9,000 units of its product in 2018 for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 180 units for a total cost of $9,000. What amount should Marin Company report as Warranty Expense in its 2018 income statement?

Hutton Cape Company, which prepares annual financial statements, is preparing adjusting entries on December 31. Analysis indicates the following: 1. The company is the defendant in an employee discrimination lawsuit involving $50,000 of damages. Legal counsel believes it is unlikely that the company will have to pay any damages. 2. Employees are entitled to one day's vacation for each month worked. The company employs 50 people who earn $120 per day and 30 who earn $160 per day. All employees worked the entire year. 3. The company is a defendant in a $500,000 product liability lawsuit. Legal counsel believes that the company probably will have to pay the amount requested. 4. The company has a defined benefit pension plan in which total pension expense for December is $50,000. The company funds one half of the expense and records a liability or the balance due. Instructions Prepare any adjusting entries necessary at the end of the year.

When vacation benefits are paid, Vacation Benefits Expense is debited.

The accounting for warranty costs is based on the

Contingent liabilities should be recorded in the accounts if there is a remote possibility that the contingency will actually occur.

Roberts Company is preparing monthly adjusting entries at December 31. An analysis reveals the following: 1. During December, Roberts Company sold 3,000 units of a product that carries a 60-day warranty. The sales for this product totaled $100,000. The company expects 4% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $20. 2. The company has been sued by a disgruntled employee. Legal counsel believes that it is reasonably possible that the company will have to pay $200,000 in damages. 3. The company has been named as one of several defendants in a $400,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages. 4. Employees earn vacation pay at a rate of 1 day per month. During December, ten employees qualify for vacation pay. Their average daily wage is $80 per employee. Instructions Prepare adjusting entries, if required, for each of the four items.

Postretirement benefits consist of payments by employers to retired employees for

Which of the following is not a condition which would require the recording of a lease contract as a finance lease?

Repair costs incurred in honoring warranty contracts should be debited to Warranty Liability.

Presented below are three different aircraft lease transactions that occurred for Western Airways in 2017. All the leases start on January 1, 2017. In no case does Western receive title to the aircraft during or at the end of the lease period; nor is there a bargain purchase option. Instructions (a) Which of the above leases are operating leases and which are finance leases? Explain your answer. (b) How should the lease transaction with Utah Insurance be recorded in 2017? (c) How should the lease transaction with Laine Leasing be recorded in 2017?

Which of the following statements concerning leases is true?

A contingent liability should be recorded in the accounts if it is ________________ that the contingency will occur and the amount is ________________.

Warranty expenses are reported on the income statement as