Homework Chapter 8
1. The balance of Lyric Corporation's accounts payable at the beginning of the most recent year was 54000.
At the end of the year, the accounts payable balance was 59000 . Lyric’s sales revenue for the year was
3,190,000, while its cost of goods sold for the year was 1,525,500. Calculate Lyrics days' payable
outstanding (DPO) for the year. Assume inventory levels are constant throughout the year. If the credit
terms from suppliers are n/30, how would you interpret Lyric’s DPO? (Round the DPO to two decimal
places, X.XX.)
Part 1.) Lyric's days' payable outstanding for the year is 13.52
Part 2.)
a. Lyric is paying later than acceptable since the credit terms are n/30, which is usually characteristic of a
company with great liquidity.
b. Since the credit terms are n/30, Lyric is paying later than acceptable, which is usually characteristic of
a company with poor liquidity.
c. Since the credit terms are n/30, Lyric is paying ahead of schedule, which is usually characteristic of a
company with great liquidity.
d. Lyrics paying ahead of schedule since the credit terms are n/30, which is usually characteristic of a
company with poor liquidity.
2. On April 1, 2022, Jasper Company purchased inventory costing $92,000 by signing a 6%, nine-month,
short-term note payable. Jasper will pay the entire note (principal and interest) on the note's maturity
date. Journalize the company's (a) purchase of inventory and (b) accrual of interest on the note payable on
October 31, 2022. (Record debits first, then credits. Exclude explanations from any journal entries.)
A ) Journalize the company's purchase of inventory.
JOURNAL ENTRY
DATE Accounts Debit Credit
2022
Inventory 92000
APR 1
Note Payable Short-term
92000
B ) Journalize the company’s accrual of interest on the note payable on October 31,2022
JOURNAL ENTRY
DATE Accounts Debit Credit
2022
Interest expense 3220
OCT 31
Interest payable
3220
3. Sierra USA, a tire manufacturer, guarantees its tires against defects for five years or 60,000 miles,
whichever comes first. Suppose Sierra USA can expect warranty costs during the five-year period to add up
to 5% of sales. Assume that a Sierra USA dealer in Denver, Colorado, made sales of $469,000 during 2021.
Sierra USA received cash for 25% of the sales and took notes receivable for the remainder. Payments to
satisfy customer warranty claims totaled $19,600 during 2021.
Read the requirements
1. Record the sales, warranty expense, and warranty payments for
Sierra
USA. (Record debits first, then credits. Exclude explanations from any journal entries.)
First, let's record the sale of the tires.
Journal Entry
Accounts Debit Credit
Cash 117,250
Notes Receivable 351,750
Sales Revenue 469,000
Part 2
Now, let's accrue the warranty expense.
Journal Entry
Accounts Debit Credit
Warranty Expense 23,450
Accrued Warranty Payable 23,450
Part 3
Next, we will record the payment of warranty expenses.
Journal Entry
Accounts Debit Credit
Accrued Warranty Payable 19,600
Cash 19,600
2. Post to the Accrued Warranty Payable T-account. The beginning balance was $13,000. At the end of 2021, how
much in accrued warranty payable does Sierra USA owe to its customers? Select the appropriate descriptions, and
enter the beginning balance and post the entries to the Accrued Warranty Payable T-account. Calculate the balance
of the liability account.
Accrued Warranty Payable
Payment 19,600 Beginning balance 13,000
Accrual 23,450
Ending balance 16,850
Part 5
At the end of 2021, Sierra USA owes $16,850 to its customers from Accrued Warranty Payable.
4. Tires USA, a tire manufacturer, guarantees its tires against defects for five years or 60,000 miles, whichever
comes first. Suppose Tires USA can expect warranty costs during the five-year period to add up to 6% of
sales. Assume that a Tires USA dealer in Denver, Colorado, made sales of $552,000 during 2021. Tires USA
received cash for 10% of the sales and took notes receivable for the remainder. Payments to satisfy
customer warranty claims totaled $20,100 during 2021
A. What amount of warranty will Tires USA report during 2021?
During 2021, Tires will report warranty expense of $33,120
B. Which accounting principle address this situation?
The accounting principle that addresses this situation is the expense recognition (matching) principle.
C. Does the warranty expense for the year equal the year's cash payments for warranties?
The warranty expense for the year does not equal the year’s cash payments for warranties
D. Explain the relevant accounting principle as it applies to measuring warranty expense.
Cash payments for warranties do not determine the amount of warranty expense for that year. The
warranty expense is estimated and matched against total sales during the period of the sales.
5. Fitzgerald Company pays its employees every other Friday. December 31, 2020, was a Sunday.
On Friday, January 5, 2021, Fitzgerald paid wages of $112,000, which covered the 14-day period
from December 20, 2020, through January 2, 2021. Wages were earned evenly across all days,
including Saturdays and Sundays. Employee income taxes withheld for this payroll period totaled
$15,610, while the FICA tax withheld was $12,600. (Ignore the employer payroll taxes in
this exercise.) Prepare the entry to accrue the company's wages and payroll taxes at
December 31, 2020. (Assume the $112,000 in wages was the gross amount of the payroll.
Record debits first, then credits. Exclude explanations from any journal entries.)
Journal Entry
date accounts debit Credit
2020
Dec 31 Salary
Expense
$96,000
Salary
Payable
$ 71,820
Employee
Income Tax
Payable
$ 13,380
FICA Tax
Payable
$ 10,800
Powered by TCPDF (www.tcpdf.org)
