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Amerax Ltd sells tablets for cash at Ksh 80,000 each inclusive of a one-year unlimited international warranty for any manufacturers defects. The manager is concerned about the rising cost of warranties compensations and have recommend provisions to be created with effect from 2019. Estimates from the sales department indicates the following
Defect type
Percentage of units sold
Estimated cost per unit
Minor
2%
2,300
Major
0.5%
6,000
Replacement
0.1%
18,600
Summary of cash book and warranty contracts indicate the following information
Year ended
31st March
2019
31st March
2020
31st March
2021
Warranties paid (Ksh)
654,000
450,900
346,200
Warranty contract in force (units)
15,000
24,800
18,400
Required
Compute the warranty provisions required at the end of each year (6 marks)
Prepare the provisions for product warranty account
1 Purchased used truck for $8,000, paying $3,000 cash and the balance onaccount.
3 Purchased cleaning supplies for $1,200 on account.
5 Paid $1,800 cash on one-year insurance policy effective March 1.
14 Billed customers $4,800 for cleaning services.
18 Paid $1,500 cash on amount owed on truck and $500 on amount owed on
cleaning supplies.
Mar. 20 Paid $1,800 cash for employee salaries.
21 Collected $1,600 cash from customers billed on March 14.
28 Billed customers $2,500 for cleaning services.
31 Paid $320 for the monthly gasoline bill for the truck.
31 Declared and paid $800 cash dividends.
(e) Journalize and post adjusting entries. Use page J2 for the journal.
(f) Journalize and post-closing entries and complete the closing process. Use page J3 for
the journal.
(g) Prepare a post-closing trial balance at March 31
following transactions were completed.
Mar. 1 Shareholders invested $14,000 cash in the business in exchange for ordinary
shares.
1 Purchased used truck for $8,000, paying $3,000 cash and the balance onaccount.
3 Purchased cleaning supplies for $1,200 on account.
5 Paid $1,800 cash on one-year insurance policy effective March 1.
14 Billed customers $4,800 for cleaning services.
18 Paid $1,500 cash on amount owed on truck and $500 on amount owed on
cleaning supplies.
Mar. 20 Paid $1,800 cash for employee salaries.
21 Collected $1,600 cash from customers billed on March 14.
28 Billed customers $2,500 for cleaning services.
31 Paid $320 for the monthly gasoline bill for the truck.
31 Declared and paid $800 cash dividends.
(d) Prepare the income statement and a retained earnings statement for March and a
classified statement of financial position at March 31.
following transactions were completed.
Mar. 1 Shareholders invested $14,000 cash in the business in exchange for ordinary
shares.
1 Purchased used truck for $8,000, paying $3,000 cash and the balance onaccount.
3 Purchased cleaning supplies for $1,200 on account.
5 Paid $1,800 cash on one-year insurance policy effective March 1.
14 Billed customers $4,800 for cleaning services.
18 Paid $1,500 cash on amount owed on truck and $500 on amount owed on
cleaning supplies.
Mar. 20 Paid $1,800 cash for employee salaries.
21 Collected $1,600 cash from customers billed on March 14.
28 Billed customers $2,500 for cleaning services.
31 Paid $320 for the monthly gasoline bill for the truck.
31 Declared and paid $800 cash dividend
(a) Journalize and post the March transactions. Use page J1 for the journal and the
three-column form of account.
(b) Prepare a trial balance at March 31 on a workshee
Marta City's school district is a legally separate entity, but two of its seven board members are also City Council members and the district is financially dependent upon the city. The school district should be reported as a:
- Discrete Presentation
Can you provide me a simple explanation why the answer is Discrete Presentation? Thank you.
Lyons Youth Association (LYA) is a sports youth organization for boys serving the Lyons Township community for the past 75 years. The five elected members of the Lyons Township town council serve as the board of governance of the LYA is approved by the town council. Assuming the LYA is a separate legal entity, the Lyon's Township financial statements would most likely address the relationship between the Township and the LYA as:
- A component unit and the LYA would be displayed using blended presentation.
Why would this be considered a blended presentation? Can you provide me simple explanation? Thank you.
What is the inventory conversion period for O'Brian's if it has sales of $320,000,
an average inventory of $5,333 and a cash conversion cycle of 20 days?
Assume the cost of sales is 55% of sales.
How is Under Writing of Shares/Debentures beneficial for the issuing company? What are the provisions regarding Underwriting of Securities in the Companies Act 2013?
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#340153 on Dec 2023