(Solution) - On September 1 2013 Carolina Electronics Company has 1 000 Blu ray -(2025 Original AI-Free Solution)

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Academic Level: Undergrad. (yrs 3-4)

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On September 1, 2013, Carolina Electronics Company has 1,000 Blu-ray players ready for sale. On October 1, 2013, 900 are sold at $125 each with a 1-year warranty. Carolina estimates that the warranty cost on each Blu-ray player sold will probably average $10 per unit. During the final 3 months of 2013, Carolina incurred warranty costs of $4,000, and in 2014 warranty costs were $5,000.
Required:
1. Prepare the journal entries for the preceding transactions using the expense warranty accrual method.
2. Show how the preceding items would be reported on the December 31, 2013, balance sheet.
3. Prepare the journal entries for the preceding transactions using the modified cash basis method.
4. Next Level Which method produces the better measure of income? Why?