Exercises

1. During December 2010, Maroco Publishing sold 2,500 12-month annual magazine
subscriptions at a rate of $30 each. The first issues were mailed in February 2011.
Prepare the entries on Marocos books to record the sale of the subscriptions and the
mailing of the first issues.

2. Batman Company had cash sales of $54,250 (including taxes) for the month of June.
Sales are subject to 8.5% sales tax. Prepare the entry to record the sale.
3. On December 1, You Company introduces a new product that includes a one-year
warranty on parts. In December, 500 units are sold. Management believes that 5% of the
units will be defective and that the average warranty costs will be $60 per unit. Prepare
the adjusting entry at December 31 to accrue the estimated warranty cost.
4. Tman Company employees are entitled to one days vacation for each month worked. In
February, 60 employees worked the full month. Record the vacation pay liability for
February assuming the average daily pay for each employee is $90.
5. Maddox Company sells televisions with a 2-year warranty. Past experience indicates that
2% of the units sold will be returned during the warranty period for repairs. The average
cost of repairs under warranty is estimated to be $50 per unit. During 2010, 7,000 units
were sold at an average price of $400. During the year, repairs were made on 40 units at
a cost of $2,400. Instructions Prepare journal entries to record the repairs made under
warranty and estimated warranty expense for the year.
6. English Company billed its customers a total of $1,575,000 for the month of November.
The total includes a 5% state sales tax.
Instructions
(a)
Determine the proper amount of revenue to report for the month.
(b)
Prepare the general journal entry to record the revenue and related liabilities for
the month.