Problem 3 – Warranty Expense - Apple sells a laptop (that costs $600) for $1,000 cash with a two-year parts warranty to
Posted: Sun Jul 03, 2022 1:15 pm
Problem 3 – Warranty Expense - Apple sells a laptop (that costs$600) for $1,000 cash with a two-year parts warranty to a customeron September 20 of Year 1. Apple expects warranty costs to be 5% ofdollar sales. It records warranty expense with an adjusting entryon December 31. On January 6 of Year 2, the laptop requires on-siterepairs that are completed on the same day. The repair costs $47for materials taken from the Parts Inventory. These are the onlyrepairs required in Year 2 for this laptop. 1. How much warrantyexpense does the company report for this laptop in Year 1? 2. Howmuch is the estimated warranty liability for the laptop as ofDecember 31 of Year 1? 3. How much is the estimated warrantyliability for the laptop as of December 31 of Year 2? 4. Preparejournal entries to record (a) the laptop’s sale; (b) the adjustmentto recognize the warranty expense on December 31 of Year 1; and (c)the repairs that occur on January 6 of Year 2. Short AnswerQuestion #1 – Why do companies record and show estimated warrantyliabilities when they might never have to pay them? Short AnswerQuestion #2 – Which payroll taxes are the employee’s responsibilityand which payroll taxes are the employer’s responsibility? Whatcosts/expenses do you think should be included in the calculationof the total cost of an employee to an organization?