Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
CHAPTER 11
Cookie Creations
(Note: This is a continuation of the Cookie Creations from Chapters 1 through 10.)
CC11 Recall that Cookie Creations sells fine European mixers that it purchases from
Kzinski Supply Co. Kzinski warrants the mixers to be free of defects in material and
workmanship for a period of one year from the date of original purchase. If the mixer has
such a defect, Kzinski will repair or replace the mixer free of charge for parts and labor.
The product must be shipped prepaid to an authorized Kzinski service center. The cost
to ship the mixer is paid by the consumer. The cost to return the product to the
consumer is paid by Kzinski.
The authorized service center is located in Boston. Because Cookie Creations
values serving its customers, it pays the shipping to Boston for any mixers needing
repair under Kzinski’s warranty terms. Based on past experience, Kzinski has found that
approximately 10% of mixers are returned for repair or replacement. The average cost to
ship a mixer to Boston is $60.
The following transactions take place in 2017 and 2018.
Instructions
(a) Calculate Cookie Creations’ warranty liability for the shipping costs at December
31, 2017.
(b) Record the estimated warranty liability at December 31, 2017.
(c) Prepare the summary journal entry (or entries) to record the shipment of the six
mixers (four from the 2017 sales and two from the 2018 sales) for warranty repair in
2018.
