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Question : 133.The accounting principle that requires revenue to be recorded when : 1258758

Accounting

 

 

133.The accounting principle that requires revenue to be recorded when earned is the:   

A.Matching principle.

 

Revenue recognition principle.

 

C.Time period assumption.

 

D.Accrual reporting principle.

 

E.Going-concern assumption.

 

 

 

 

134.Adjusting entries:   

A.Affect only income statement accounts.

 

B.Affect only balance sheet accounts.

 

Affect both income statement and balance sheet accounts.

 

D.Affect cash accounts.

 

E.Affect only equity accounts.

 

 

 

 

135.The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:   

A.Recognition principle.

 

B.Cost principle.

 

C.Cash basis of accounting.

 

Expense recognition (Matching) principle.

 

E.Time period principle.

 

 

 

 

136.The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:   

A.Accrual basis accounting.

 

B.Operating cycle accounting.

 

Cash basis accounting.

 

D.Revenue recognition accounting.

 

E.Current basis accounting.

 

 

 

 

137.The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:   

A.Cash basis accounting.

 

B.The matching principle.

 

C.The time period assumption.

 

Accrual basis accounting.

 

E.Revenue basis accounting.

 

 

 

 

138.Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of:   

A.Items that require contra accounts.

 

Items that require adjusting entries.

 

C.Asset and equity.

 

D.Asset accounts.

 

E.Income statement accounts.

 

 

 

 

139.A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would:   

A.Understate net income by $28,000.

 

Overstate net income by $28,000.

 

C.Have no effect on net income.

 

D.Overstate assets by $28,000.

 

E.Understate assets by $28,000.

 

 

 

 

140.If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show:   

A.Assets overstated and equity understated.

 

B.Assets and equity both understated.

 

C.Assets overstated, net income understated, and equity overstated.

 

D.Assets, net income, and equity understated.

 

Assets, net income, and equity overstated.

 

 

 

 

141.If a company failed to make the end-of-period adjustment to move the amount of management fees that were earned from the Unearned Management Fees account to the Management Fees Revenue account, this omission would cause:   

A.An overstatement of net income.

 

B.An overstatement of assets.

 

An overstatement of liabilities.

 

D.An overstatement of equity.

 

E.An understatement of liabilities.

 

 

 

 

142.Profit margin is defined as:   

A.Revenues divided by net sales.

 

B.Net sales divided by assets.

 

Net income divided by net sales.

 

D.Net income divided by assets.

 

E.Net sales divided by net income.

 

 

 

 

 

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July 1, 2023
    

 

 

131. Claitin Inc. uses large warehouses to store its finished goods ready for sale. After its personnel and auditors conducted a physical inventory of goods on one side of its warehouses, Claitin Inc. transported a portion of the inventory to another part of the warehouse, removing the inventory tags that indicated that the items had already been counted in inventory, and thereby included the items a second time in inventory. In this way, the firm overstated its ending inventory for the current year, understated its cost of goods sold, and overstated its earnings. This action resulted in an overstatement of the beginning inventory for the next year. Assuming a correct count of the ending inventory for the second year, the action has the result of overstating cost of goods sold for the second year and understating earnings. Net income for the two years combined, however, is correctly stated, the net result of an overstatement in the first year offset by an equal understatement in the second year. The actions 
A. are in accordance with U.S. GAAP.
B. are in accordance with IFRS.
C. violate ethical principles.
D. are in accordance with U.S. GAAP, but not IFRS.
E. are in accordance with IFRS, but not U.S. GAAP.

 

132. On December 10 of the current year, XTREME Sports Inc. receives an advance of $50,000 from a hockey team for 20,000 custom-made shirts with the team’s logo, which the team intends to distribute to fans entering a hockey game during the first week in January. XTREME Sports Inc. completes the manufacturing of the shirts on December 30, intending to ship them on December 31 before its accounting period ends. Unfortunately, a snowstorm on December 31 prevented their shipment. XTREME Sports Inc. recorded this transaction as a sale for December, and reduced its inventory accordingly. It set the items aside in its shipping room on December 31 with a clear sign to its own personnel conducting a physical inventory on that date and to its auditors who were observing the count that the items were not to be counted as inventory. These actions 
A. are in accordance with U.S. GAAP.
B. are in accordance with IFRS.
C. violate ethical principles.
D. are in accordance with U.S. GAAP, but not IFRS.
E. are in accordance with IFRS, but not U.S. GAAP.

 

133. On August 1, Covington Motors pays £18,000 for insurance coverage for the next 12 months. On August 1, the firm records the following journal entry:  
A. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000  
     Insurance Expense . . . .. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 18,000
B. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000  
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . 18,000
C. Insurance Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . 18,000  
     Prepaid Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
D. Liability for Prepaid Insurance . . . . . . .  . . . . . . . . . . . . . . . . . . . .  . . . . 18,000 
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . 18,000
E. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 18,000  
     Liability for Prepaid Insurance . . . . . . .  . . . . . . . . . . . . . . . . . . . .  . .. . . . 18,000

 

134. On August 1, Covington Motors pays £18,000 for insurance coverage for the next 12 months. On August 1, the firm records the following journal entry:

Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
     Cash. . . . . . . . . . . . . . . . . . . . .  . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000

At the end of each of the next 12 months, the firm records the following adjusting entry:  
A. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500  
     Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 1,500
B. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . 1,500
C. Insurance Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . 1,500  
     Prepaid Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
D. Liability for Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,500 
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . 1,500
E. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 1,500 
     Liability for Prepaid Insurance . . . . . . .  . . . . . . . . . . . . . . . . . . . . .  .  . . . . 1,500

 

135. Focus Company sells merchandise with a one year warranty.  In 2013, sales consisted of 2,500 units.  It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014.  In the 2013 income statement, Focus should show warranty expense of 
A. $25,000
B. $7,500
C. $17,500
D. $0
E. $12,500

 

136. During September, Genesis sold 100 radios for $50 each.  Each radio cost Genesis $30 to purchase, and carried a two-year warranty.  If 5% typically need to be replaced over the warranty period and one is actually replaced during September, for what amount in September would Genesis debit Product Warranty Expense? 
A. $50
B. $150
C. $30
D. $120
E. $52.50

 

137. Albion Company sells merchandise with a one year warranty.  In 2013, sales consisted of 2,500 units.  It is estimated that warranty repairs will average $20 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014.  In the 2013 income statement, Albion should show warranty expense of:  
A. $15,000
B. $35,000
C. $50,000
D. $0
E. $25,000

 

138. Youngstown Company sells merchandise with a one year warranty.  Sales consisted of 2,500 units in 2013 and 2,000 units in 2014.  It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014 for the 2013 sales. Similarly, 30% of repairs will be made in 2014 and 70% in 2015 for the 2014 sales.  In the 2014 income statement, how much of the  warranty expense shown will be due to 2013 sales?  
A. $7,500
B. $17,500
C. $25,000
D. $0
E. $12,500

 

139. Under U.S. GAAP, the cost of a product warranty should be included as an expense in the  
A. period the cash is collected for a product sold on account.
B. future period when the cost of repairing the product is paid.
C. period of the sale of the product.
D. future period when the product is repaired or replaced.
E. past period when the product is under development.

 

140. Lager Company sells merchandise with a one year warranty.  In 2013, sales consisted of 1,600 units.  It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014.  In the 2013 income statement, Lager should show warranty expense of  
A. $4,800
B. $11,200
C. $16,000
D. $0
E. $8,000

 

 

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July 1, 2023
    

 

 

131. Claitin Inc. uses large warehouses to store its finished goods ready for sale. After its personnel and auditors conducted a physical inventory of goods on one side of its warehouses, Claitin Inc. transported a portion of the inventory to another part of the warehouse, removing the inventory tags that indicated that the items had already been counted in inventory, and thereby included the items a second time in inventory. In this way, the firm overstated its ending inventory for the current year, understated its cost of goods sold, and overstated its earnings. This action resulted in an overstatement of the beginning inventory for the next year. Assuming a correct count of the ending inventory for the second year, the action has the result of overstating cost of goods sold for the second year and understating earnings. Net income for the two years combined, however, is correctly stated, the net result of an overstatement in the first year offset by an equal understatement in the second year. The actions 
A. are in accordance with U.S. GAAP.
B. are in accordance with IFRS.
C. violate ethical principles.
D. are in accordance with U.S. GAAP, but not IFRS.
E. are in accordance with IFRS, but not U.S. GAAP.

 

132. On December 10 of the current year, XTREME Sports Inc. receives an advance of $50,000 from a hockey team for 20,000 custom-made shirts with the team’s logo, which the team intends to distribute to fans entering a hockey game during the first week in January. XTREME Sports Inc. completes the manufacturing of the shirts on December 30, intending to ship them on December 31 before its accounting period ends. Unfortunately, a snowstorm on December 31 prevented their shipment. XTREME Sports Inc. recorded this transaction as a sale for December, and reduced its inventory accordingly. It set the items aside in its shipping room on December 31 with a clear sign to its own personnel conducting a physical inventory on that date and to its auditors who were observing the count that the items were not to be counted as inventory. These actions 
A. are in accordance with U.S. GAAP.
B. are in accordance with IFRS.
C. violate ethical principles.
D. are in accordance with U.S. GAAP, but not IFRS.
E. are in accordance with IFRS, but not U.S. GAAP.

 

133. On August 1, Covington Motors pays £18,000 for insurance coverage for the next 12 months. On August 1, the firm records the following journal entry:  
A. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000  
     Insurance Expense . . . .. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 18,000
B. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000  
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . 18,000
C. Insurance Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . 18,000  
     Prepaid Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
D. Liability for Prepaid Insurance . . . . . . .  . . . . . . . . . . . . . . . . . . . .  . . . . 18,000 
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . 18,000
E. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 18,000  
     Liability for Prepaid Insurance . . . . . . .  . . . . . . . . . . . . . . . . . . . .  . .. . . . 18,000

 

134. On August 1, Covington Motors pays £18,000 for insurance coverage for the next 12 months. On August 1, the firm records the following journal entry:

Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
     Cash. . . . . . . . . . . . . . . . . . . . .  . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000

At the end of each of the next 12 months, the firm records the following adjusting entry:  
A. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500  
     Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 1,500
B. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . 1,500
C. Insurance Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . 1,500  
     Prepaid Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
D. Liability for Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,500 
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . 1,500
E. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 1,500 
     Liability for Prepaid Insurance . . . . . . .  . . . . . . . . . . . . . . . . . . . . .  .  . . . . 1,500

 

135. Focus Company sells merchandise with a one year warranty.  In 2013, sales consisted of 2,500 units.  It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014.  In the 2013 income statement, Focus should show warranty expense of 
A. $25,000
B. $7,500
C. $17,500
D. $0
E. $12,500

 

136. During September, Genesis sold 100 radios for $50 each.  Each radio cost Genesis $30 to purchase, and carried a two-year warranty.  If 5% typically need to be replaced over the warranty period and one is actually replaced during September, for what amount in September would Genesis debit Product Warranty Expense? 
A. $50
B. $150
C. $30
D. $120
E. $52.50

 

137. Albion Company sells merchandise with a one year warranty.  In 2013, sales consisted of 2,500 units.  It is estimated that warranty repairs will average $20 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014.  In the 2013 income statement, Albion should show warranty expense of:  
A. $15,000
B. $35,000
C. $50,000
D. $0
E. $25,000

 

138. Youngstown Company sells merchandise with a one year warranty.  Sales consisted of 2,500 units in 2013 and 2,000 units in 2014.  It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014 for the 2013 sales. Similarly, 30% of repairs will be made in 2014 and 70% in 2015 for the 2014 sales.  In the 2014 income statement, how much of the  warranty expense shown will be due to 2013 sales?  
A. $7,500
B. $17,500
C. $25,000
D. $0
E. $12,500

 

139. Under U.S. GAAP, the cost of a product warranty should be included as an expense in the  
A. period the cash is collected for a product sold on account.
B. future period when the cost of repairing the product is paid.
C. period of the sale of the product.
D. future period when the product is repaired or replaced.
E. past period when the product is under development.

 

140. Lager Company sells merchandise with a one year warranty.  In 2013, sales consisted of 1,600 units.  It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014.  In the 2013 income statement, Lager should show warranty expense of  
A. $4,800
B. $11,200
C. $16,000
D. $0
E. $8,000

 

 

default image
July 1, 2023
    

 

 

131. Claitin Inc. uses large warehouses to store its finished goods ready for sale. After its personnel and auditors conducted a physical inventory of goods on one side of its warehouses, Claitin Inc. transported a portion of the inventory to another part of the warehouse, removing the inventory tags that indicated that the items had already been counted in inventory, and thereby included the items a second time in inventory. In this way, the firm overstated its ending inventory for the current year, understated its cost of goods sold, and overstated its earnings. This action resulted in an overstatement of the beginning inventory for the next year. Assuming a correct count of the ending inventory for the second year, the action has the result of overstating cost of goods sold for the second year and understating earnings. Net income for the two years combined, however, is correctly stated, the net result of an overstatement in the first year offset by an equal understatement in the second year. The actions 
A. are in accordance with U.S. GAAP.
B. are in accordance with IFRS.
C. violate ethical principles.
D. are in accordance with U.S. GAAP, but not IFRS.
E. are in accordance with IFRS, but not U.S. GAAP.

 

132. On December 10 of the current year, XTREME Sports Inc. receives an advance of $50,000 from a hockey team for 20,000 custom-made shirts with the team’s logo, which the team intends to distribute to fans entering a hockey game during the first week in January. XTREME Sports Inc. completes the manufacturing of the shirts on December 30, intending to ship them on December 31 before its accounting period ends. Unfortunately, a snowstorm on December 31 prevented their shipment. XTREME Sports Inc. recorded this transaction as a sale for December, and reduced its inventory accordingly. It set the items aside in its shipping room on December 31 with a clear sign to its own personnel conducting a physical inventory on that date and to its auditors who were observing the count that the items were not to be counted as inventory. These actions 
A. are in accordance with U.S. GAAP.
B. are in accordance with IFRS.
C. violate ethical principles.
D. are in accordance with U.S. GAAP, but not IFRS.
E. are in accordance with IFRS, but not U.S. GAAP.

 

133. On August 1, Covington Motors pays £18,000 for insurance coverage for the next 12 months. On August 1, the firm records the following journal entry:  
A. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000  
     Insurance Expense . . . .. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 18,000
B. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000  
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . 18,000
C. Insurance Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . 18,000  
     Prepaid Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
D. Liability for Prepaid Insurance . . . . . . .  . . . . . . . . . . . . . . . . . . . .  . . . . 18,000 
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . 18,000
E. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 18,000  
     Liability for Prepaid Insurance . . . . . . .  . . . . . . . . . . . . . . . . . . . .  . .. . . . 18,000

 

134. On August 1, Covington Motors pays £18,000 for insurance coverage for the next 12 months. On August 1, the firm records the following journal entry:

Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
     Cash. . . . . . . . . . . . . . . . . . . . .  . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000

At the end of each of the next 12 months, the firm records the following adjusting entry:  
A. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500  
     Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 1,500
B. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . 1,500
C. Insurance Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . 1,500  
     Prepaid Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
D. Liability for Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,500 
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . 1,500
E. Prepaid Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 1,500 
     Liability for Prepaid Insurance . . . . . . .  . . . . . . . . . . . . . . . . . . . . .  .  . . . . 1,500

 

135. Focus Company sells merchandise with a one year warranty.  In 2013, sales consisted of 2,500 units.  It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014.  In the 2013 income statement, Focus should show warranty expense of 
A. $25,000
B. $7,500
C. $17,500
D. $0
E. $12,500

 

136. During September, Genesis sold 100 radios for $50 each.  Each radio cost Genesis $30 to purchase, and carried a two-year warranty.  If 5% typically need to be replaced over the warranty period and one is actually replaced during September, for what amount in September would Genesis debit Product Warranty Expense? 
A. $50
B. $150
C. $30
D. $120
E. $52.50

 

137. Albion Company sells merchandise with a one year warranty.  In 2013, sales consisted of 2,500 units.  It is estimated that warranty repairs will average $20 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014.  In the 2013 income statement, Albion should show warranty expense of:  
A. $15,000
B. $35,000
C. $50,000
D. $0
E. $25,000

 

138. Youngstown Company sells merchandise with a one year warranty.  Sales consisted of 2,500 units in 2013 and 2,000 units in 2014.  It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014 for the 2013 sales. Similarly, 30% of repairs will be made in 2014 and 70% in 2015 for the 2014 sales.  In the 2014 income statement, how much of the  warranty expense shown will be due to 2013 sales?  
A. $7,500
B. $17,500
C. $25,000
D. $0
E. $12,500

 

139. Under U.S. GAAP, the cost of a product warranty should be included as an expense in the  
A. period the cash is collected for a product sold on account.
B. future period when the cost of repairing the product is paid.
C. period of the sale of the product.
D. future period when the product is repaired or replaced.
E. past period when the product is under development.

 

140. Lager Company sells merchandise with a one year warranty.  In 2013, sales consisted of 1,600 units.  It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014.  In the 2013 income statement, Lager should show warranty expense of  
A. $4,800
B. $11,200
C. $16,000
D. $0
E. $8,000

 

 

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