During the year, Hutton Co. sold 95 green machines for $2,100 each, which included a...
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Accounting
During the year, Hutton Co. sold 95 green machines for $2,100 each, which included a warranty. Warranty costs per machine were reasonably estimated to be $312, and are probable in occurrence and accounted for under GAAP. Actual warranty costs incurred during the year were $22,956. Which of the following statements is true?
A. The liability related to this warranty should have a credit balance of $6,684 at the end of the year.
B. Total warranty expense recorded for the year should be $22,956.
C. Total sales income of $29,640 should be recorded for the year.
D. No estimated warranty expense should be recorded for the year because it is not acceptable to book estimates.
E. None of the above.
8. Johnson Co. provides an incentive compensation plan whereby its president receives a bonus of 20% of the net income after deducting the bonus but before deducting income tax. Income before tax and bonus is $600,000 and the effective tax rate is 30%. The bonus is a tax-deductible expense. Which of the following statements is true?
A. The bonus is $84,000
B. The bonus is $100,000
C. The tax is $144,000
D. The tax is $160,000
E. The tax is $180,000
F. None of the above.
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