Chapter 4
Current Liabilities
199
b) Explain how the unearned warranty revenue will appear on the balance sheet at the end
of 2016.
c) Prepare the journal entry on December 31 to record warranty revenue in 2017.
Date
Account Title and Explanation
Debit
Credit
Analysis
Why do you think the businesses record the full amount of warranty expenses concurrently as
products are sold even though the amount of warranty liabilities are reduced over the life of
warranty period, which can be as long as several years?
AP-16B (
6
)
On April 1, 2016, Sinister Toys signed a $600,000, six-month note payable with a 12% interest
rate. Sinister Toys has a June 30 year-end.
Required
a) Record the signing of the note payable on April 1, 2016.
b) Prepare the required adjusting entry on June 30, 2016.
