Below are four independent, material and unrelated situations involving accounting changes. Each change occurs during...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Below are four independent, material and unrelated situations involving accounting changes. Each change occurs during 2020 before any adjusting or closing entries were prepared. Assume a tax rate of 40% and any tax effects are adjusted through the deferred tax asset or liability account.
Discuss and evaluate the type of accounting change, briefly describe any steps that should be taken to appropriately report the situation and complete journal entries to
Louis Inc. introduced a new line of auto covers in 2019 that carry a one-year warranty against manufacturers defects. Based on industry experience, warranty costs are expected to approximate 4% of sales. Sales of the covers in 2019 were $1,500,000. Warranty expense and warranty liability of $60,000 was recorded in 2019. In late 2020, the companys claims experience was evaluated, and it was determined that claims were far fewer than expected and 3% rather than 4% was recommended. Sales of the covers in 2020 amounted to $3,200,000 and warranty expenditures in 2020 totaled $72,000. document the change.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
