131. The Crafter Company had the following assets and liabilities as of December 31, 2012:
132. Garrett Company sells merchandise with a one year warranty. In 2012, sales consisted of 3,500 units. It is estimated that warranty repairs will average $15 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Garrett should show warranty expense of
A. $36,750
B. $15,750
C. $52,500
D. $0
133. Elgin Company sells merchandise with a one year warranty. Sales consisted of 2,500 units in 2012 and 2,000 units in 2013. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013 for the 2012 sales. Similarly, 30% of repairs will be made in 2013 and 70% in 2014 for the 2013 sales. In the 2013 income statement, how much of the warranty expense shown will be due to 2012 sales?
A. $7,500
B. $17,500
C. $25,000
D. $0
134. 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
135. Power Company sells merchandise with a one year warranty. In 2012, 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 2012 and 70% in 2013. In the 2012 income statement, Power should show warranty expense of
A. $4,800
B. $11,200
C. $16,000
D. $0
136. During May, Blast sold 500 portable CD players for $50 each. Each CD player cost Blast $25 to purchase and carried a one-year warranty. If 10 percent typically need to be replaced over the warranty period, what amount should Blast debit Product Warranty Expense for in May?
A. $2,500
B. $1,250
C. $250
D. $1,000
137. Estimating and recording product warranty expense in the period of the sale best follows which of the following accounting concepts?
A. cost concept
B. business entity concept
C. matching concept
D. materiality concept
138. The Crafter Company had the following assets and liabilities as of December 31, 2012:
139. The journal entry a company uses to record the estimated accrued product warranty liability is
A. debit Product Warranty Expense; credit Product Warranty Payable
B. debit Product Warranty Payable; credit Cash
C. debit Product Warranty Expense; credit Cash
D. debit Product Warranty Payable; credit Product Warranty Expense
140. Which of the following is the most desirable quick ratio?
A. 2.20
B. 1.80
C. 1.95
D. 1.50