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## Rao Co. introduced a new line of machines

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Rao Co. introduced a new line of machines 1. Sawyer Company self-insures its property for fire and storm damage. If the company were to obtain insurance on the property, it would cost them \$1,500,000 per year. The company estimates that on average it will incur losses of \$1,200,000 per year. During 2014, \$525,000 worth of losses were sustained. How much total expense and/or loss should be recognized by Sawyer Company for 2014? a. \$525,000 in losses and no insurance expense b. \$525,000 in losses and \$675,000 in insurance expense c. \$0 in losses and \$1,200,000 in insurance expense d. \$0 in losses and \$1,500,000 in insurance expense 2. A company offers a cash rebate of \$2 on each \$6 package of batteries sold during 2014. Historically, 10% of customers mail in the rebate form. During 2014, 6,000,000 packages of batteries are sold, and 210,000 \$2 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the 2014 financial statements dated December 31? a. \$1,200,000; \$1,200,000 b. \$1,200,000; \$780,000 c. \$780,000; \$780,000 d. \$420,000; \$780,000 3. A company buys an oil rig for \$3,000,000 on January 1, 2014. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is \$600,000 (present value at 10% is \$231,330). 10% is an appropriate interest rate for this company. What expense should be recorded for 2014 as a result of these events? a. Depreciation expense of \$360,000 b. Depreciation expense of \$300,000 and interest expense of \$23,133 c. Depreciation expense of \$300,000 and interest expense of \$60,000 d. Depreciation expense of \$323,133 and interest expense of \$23,133 4. During 2013, Rao Co. introduced a new line of machines that carry a three-year warranty against manufacturerâ€™s defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 5% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method) Sales Actual Warranty Expenditures 2013 \$ 1,600,000 \$ 39,000 2014 2,500,000 65,000 2015 2,100,000 135,000 \$6,200,000 \$239,000 What amount should Rao report as a liability at December 31, 2015? a. \$0 b. \$134,000 c. \$105,000 d. \$381,000 5. Palmer Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 3 boxtops from Palmer Frosted Flakes boxes and \$1. The company estimates that 60% of the boxtops will be redeemed. In 2014, the company sold 675,000 boxes of Frosted Flakes and customers redeemed 330,000 boxtops receiving 110,000 bowls. If the bowls cost Palmer Company \$3 each, how much liability for outstanding premiums should be recorded at the end of 2014? a. \$270,000 b. \$50,000 c. \$75,000 d. \$138,000 Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help

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