c)Current or long-term liability (dependent on term of warranty) d)Current liability
g)Current or noncurrent (dependent on time involved)
k)Deduction from face value of note
l)Disclose in footnote
o)Disclose in footnote
p)Separate presentation in current liability section
E13-7 (Adjusting Entry for Sales Tax) During the month of June, Rowling Boutique had cash sales of $233,200 and credit sales of $153,700, both of which include the 6% sales tax that must be remitted to the state by July 15.
Revenue from sales21,900
Sales Tax Payable21,900
Sales plus sales tax (233,200 + 153,700) = 386,900
Sales exclusive of tax (386,900 / 1.06) = 365,000
Sales tax (386,900 -365,000) = 21,900
E13-11 (Warranties) Sheryl Crow Equipment Company sold 500 Rollomatics during 2007 at $6,000 each. During 2007, Crow spent $20,000 servicing the 2-year warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.
(a) Prepare 2007 entries for Crow using the expense warranty approach. Assume that Crow estimates the total cost of servicing the warranties will be $120,000 for 2 years. (b) Prepare 2007 entries for Crow assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $150,000 relates to sales of warranty contracts. Crow estimates the total cost of servicing the warranties will be $120,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs.