Answer:
Larry must have signed a PROXY AGREEMENT that gives the management group control over his shares.
A proxy agreement is generally used for stockholders voting procedures, they basically grant another person the right to vote on behalf of another stockholder.
Larry's current investment in the company is $86,000.
= 2,000 stocks x $43 = $86,000
If the company issues new shares and Larry makes no additional purchase, Larry's investment will be worth $82,560.
company's new market value = (20,000 x $43) + (5,000 x $34.40) = $1,032,000
new stock price = $1,032,000 / 25,000 stocks = $41.28
= $41.28 x 2,000 = $82,560
This scenario is an example of STOCK DILUTION.
The stock price will lower because the increase in the company's value is less than proportional to the increase in the number of stocks.
Larry could be protected if the firm's corporate charter includes a PREEMPTIVE provision.
Preemptive rights give current stockholders the right to purchase more stocks (in case the company issues more stocks) before any outside investors.
If Larry exercises the provisions in the corporate charter to protect his stake, his investment value in the firm will become $103,200.
= [(5,000 / 10) x $34.40] + $86,000 = $17,200 + $86,000 = $103,200
Once a firm reaches the lowest point on the Long Run Average Total Cost Curve then the firm will automatically charge a lower prices for their product or service. The cost analysis model that we studied in Chapter 9 said that this is always the best strategy to effectively capture the maximum market share.
A- True
B- False
Answer:
B. False
Explanation:
As it is mentioned in the question that When a firm reaches a lowest point on the Long Run Average Total Cost Curve then it automatically charged a less price for the product and services they are rendering to the customer. But this lowest point deals in the only perfect competition also it would not capture the maximum market share but it would result into optimum production and goods supply at minimum price
A portfolio with a 20% standard deviation generated a return of 10% last year when T-bills were paying 5.0%. This portfolio had a Sharpe ratio of ____. A. 0.45 B. 0.20 C. 0.25 D. 0.15
Answer:
0.25
Explanation:
A portfolio has a standard deviation of 20%
The portfolio also generated a return of 10%
T-bills were paying 5%
Therefore, Sharpe ratio of the portfolio can be calculated as follows
Sharpe ratio= 10-5.0/20
= 5/20
= 0.25
Hence the Sharpe ratio of the portfolio is 0.25
Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its inventory to provide a cooler weather option. The tops would sell for $53 each with expected sales of 4,300 tops annually. By adding the fleece tops, management feels the firm will sell an additional 285 pairs of jeans at $65 a pair and 420 fewer T-shirts at $26 each. The variable cost per unit is $36 on the jeans, $16 on the T-shirts, and $31 on the fleece tops. With the new item, the depreciation expense is $33,000 a year and the fixed costs are $76,000 annually. The tax rate is 35 percent. What is the project's operating cash flow?
Answer: $26,282.25
Explanation:
The operating cash-flow will be the amount of cash the company got from sales less the amount they would have to pay on taxes.
Cash from tops
= (Sales price - Variable costs) * quantity
= ( 53 - 31) * 4,300
= $94,600
Cash from jeans
= ( 65 - 36) * 285
= $8,265
Cash from jeans
= (26 - 16) * -420
= -$4,200
As this deals with cash, a tax adjusted depreciation will need to be added back because it is a non cash expense and fixed costs will have to be deducted.
Pre-tax operating cash-flow = 94,600 + 8,265 - 4,200 - 76,000
= $22,665
Post-tax Project Operating cash-flow
= $22,665 * ( 1 - 0.35) + (depreciation * tax)
= $22,665 * ( 1 - 0.35) + (33,000 * 0.35)
= $14,732.25 + 11,550
= $26,282.25
A bond with a par value of $1,000 and an annual coupon has a yield to maturity of 5.60% and a current price of $975. If the bond has 18 years to maturity, what is its current yield?
Answer:
Current Yield is 5.74%
Explanation:
Current yield is the ratio of coupon payment of a bond to its current market price. It is calculated by using coupon payment and the current market value of the bond.
Coupon Payment = $1,000 x 5.6% = $56
Current market price = $975
Formula for Current yield is as follow
Current Yield = Annual Coupon Payment / Current Market Price
Current Yield = $56 / $975
Current Yield = 0.0574% = 5.74%
Given below are two independent scenarios: a. Dream Co. has budgeted sales of $500,000, fixed costs are $240,000, and variable costs are $375,000. What is its contribution margin ratio? Enter the percentage amount as a whole number (for example, enter 10% as "10"). % b. Pearl Company has sales of $825,000, variable costs are 30% of sales, and fixed costs are $360,000. What is its operating profit? $
Answer:
a. 25
b. $217,500
Explanation:
Contribution Margin Ratio = Contribution / Sales × 100
= ($500,000 - $375,000) / $500,000 × 100
= 25.00% or 25
Income statement for Pearl Company
Sales $825,000
Less Variable Cost ($247,500)
Contribution $577,500
Less Fixed Costs ($360,000)
Operating Profit $217,500
_______ appraisals occur between managers and their subordinates whenever the need to discuss ongoing progress and areas for improvement arise.
Answer: Informal
Explanation: appraisals that occur between managers and their subordinates whenever the need to discuss ongoing progress and areas for improvement arise is known as an informal appraisal. Here, a manager provides significant feedback and direction to his employees outside of a formal review meeting thus providing opportunities for coaching and rapport building. It is carried out whenever the manager or supervisor deems it necessary.
One characteristic of weekly newspapers is that they usually serve national consumers rather than local consumers. tend to have a larger male readership than daily newspapers. emphasize local news and advertising. have a significantly lower CPM than daily newspapers. do not charge premium rates.
Answer: emphasize local news and advertising.
Explanation:
One of the main function of the newspaper is to pass message accross to its readership. The newspaper sends information accross to people by informing them about happenings in the local and international scene.
One characteristic of weekly newspapers is that they emphasize local news and advertising. People can advertise on weekly newspapers and gets information across to the local people.
A town with a small airport is served by two competing airlines. Which of the following strategies would make the airlines more likely to compete on price?
a) The airlines fly identical planes, with the same type of seat and the same amount of legroom for customers
b) One airline offers meals on board every flight while the other serves no meals but has fewer delayed flights
c) Each airline offers flights to a different set of other cities
d) The airlines offer loyalty programs, motivating existing customers to continue to fly with them
Answer:
Option A, The airlines fly identical planes, with the same type of seat and the same amount of legroom for customers.
Explanation:
Option “A” is correct because a firm or company compete on prices if the product offered by every firm are identical. additionally, if the product can not be differentiated then the firm can compete on the basis of price. Therefore, if two airlines fly identical planes and provide identical services like the same seat and the same amount of leg space to the customers.
The price of a stock at the end of each of the past three years has been $14, $12, and $11 with $11 being the latest price. The stock pays an annual dividend of $1 per share. What is the average annual capital gain for the past two years
Answer: 11.31%
Explanation:
From the question, we are informed that the price of a stock at the end of each of the past three years has been $14, $12, and $11 with $11 being the latest price and that the stock pays an annual dividend of $1 per share.
The average annual capital gain for the past two years will be:
= (-$2/$14) + ($-1/$12)/2
= 11.31%
What is the yield to maturity of a bond that pays a 6% coupon rate with semiannual coupon payments, has a par value of $1,000, matures in 15 years, and is currently selling for $803
Answer:
Yield to Maturity = 8.11 %
Explanation:
The Yield to maturity is the discount rate that equates then price of the bonds to the present of cash inflows expected from the bond
The yield on the bond can be determined as follows using the formula below:
YTM = C + F-P/n) ÷ 1/2 (F+P)
YTM-Yield to maturity-
C- annual coupon
F- Face Value
P- Current Price
n- years to maturity
YTM-?, C- 6%× 1000 =60, Face Value - 1,000, P-803, n- 15
YTM = (60 + (1000-803)/15) ÷ ( 1/2× (1000 + 803) )
YTM = 0.0811 × 100 = 8.11 %
Yield to Maturity = 8.11 %
the for-profit unionized industries will be less productive. all taxpayers are better off. the union is economically harmful. the for-profit unionized industries will be harmed.
Answer: All taxpayers are better off.
Explanation:
In 2019, 23% of the Federal budget of $4.4 trillion was spent on Social Security which provided retirement benefits for about 45 million retired people. Most of this money came from Federal Revenues which are financed by Tax collections.
If the Unions helped more people secure pension benefits so that when they retire the Federal Government would not have to spend so much taking care of them, it can be argued that the amount of taxes paid by people would be less so all taxpayers would be better off.
Sonic Inc. manufactures two models of speakers, Rumble and Thunder. Based on the following production and sales data for June, prepare (a) a sales budget and (b) a production budget: Rumble Thunder Estimated inventory (units), June 1 750 300 Desired inventory (units), June 30 500 250 Expected sales volume (units): Midwest Region 12,000 3,500 South Region 14,000 4,000 Unit sales price $60 $90 a. Prepare a sales budget.
Answer: please see explanation column
Explanation:
Rumble Thunder
Estimated inventory (units), June 1 750 300
Desired inventory (units), June 30 500 250
Expected sales volume (units):
Midwest Region 12,000 3,500
South Region 14,000 4,000
Unit sales price $60 $90
a) Sonic Inc. Sales Budget for June
Unit Sales Vol Unit Selling price Total Sales
Model Rumble:
Midwest Region 12000 60 $720,000
South Region 14000 60 $840,000
Total 1,560,000
Model Thunder:
Midwest Region 3500 $90 $315,000
South Region 4000 $90 $360,000
Total $675,000
Total revenue from sales 1,560,000 + $675,000 =$2,235,000
B) Sonic Inc. Production budget for June
Units Model Rumble Units Model Thunder
Expected units to be sold 26000 7500
Add: Desired ending inventory + 500 + 250
Total units required 26500 7750
Less: Beginning inventory - 750 - 300
Total units to be produced $25750 $ 7450
Calculation :
Expected units to be sold =12,000 + 14,000 = $26,000
3,500 + 4,000 = $7,500
Total units required=Expected units to be sold+ Desired ending inventory
26000 +500 =$26,500
7,500 +250= $7,750
A company purchased $3,500 of merchandise on July 5 with terms 3/10, n/30. On July 7, it returned $700 worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 12 is:
Answer and Explanation:
The Journal entry is shown below:-
Accounts payable Dr, $2,800 ($3,500 - $700)
To Merchandise inventory $84 ($2,800 × 0.03)
To Cash $2,716 ($2,800 × (1 - 0.03)
(being the payment is recorded)
Here we debited the accounts payable as it decreased the liabilities and we credited the merchandise inventory and cash as it also decline the assets
Coney Island Entertainment issues $1,300,000 of 5% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year.
Calculate the issue price of a bond and complete the first three rows of an amortization schedule when:
Required:
1. The market interest rate is 5% and the bonds issue at face amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors.)
Issue price
Date Cash Paid Interest Expense Increase in Carrying value Carrying value
1/1
6/30
13/31
2. The market interest rate is 6% and the bonds issue at a discount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors.)
3. The market interest rate is 4% and the bonds issue at a premium. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors.)
Answer:
1) The market interest rate is 5% and the bonds issue at face amount.
Dr Cash 1,300,000
Cr Bonds payable 1,300,000
Year Interest payment Book value of bonds
June/1 $32,500 $1,300,000
Dec/1 $32,500 $1,300,000
June/2 $32,500 $1,300,000
2) The market interest rate is 6% and the bonds issue at a discount.
price of bonds:
PV of face value = $1,300,000 / (1 + 3%)³⁰ = $535,582.79
PV of coupons = $32,500 x 19.600 (PV annuity factor, 3%, 30 periods) = $637,000
market price = $1,172,582.79
Dr Cash 1,172,582.79
Dr Discount on bonds payable 127,417.21
Cr Bonds payable 1,300,000
discount amortization per coupon payment = $127,417.21 / 30 = $4,247.24
Year Cash paid Interest Amortization Bond Book
expense bond discount discount value
June/1 $32,500 $36,747.24 $4,247.24 $123,169.97 $1,176,830.03
Dec/1 $32,500 $36,747.24 $4,247.24 $118,922.73 $1,181,077.27
June/2 $32,500 $36,747.24 $4,247.24 $114,675.49 $1,185,324.51
3. The market interest rate is 4% and the bonds issue at a premium.
price of bonds:
PV of face value = $1,300,000 / (1 + 2%)³⁰ = $717,692.16
PV of coupons = $32,500 x 22.396 (PV annuity factor, 2%, 30 periods) = $727,870
market price = $1,445,562.16
Dr Cash 1,445,562.16
Cr Bonds payable 1,300,000
Cr Premium on bonds payable 145,562.16
discount amortization per coupon payment = $145,562.16 / 30 = $4,852.07
Year Cash paid Interest Amortization Bond Book
expense bond discount premium value
June/1 $32,500 $27,647.93 $4,852.07 $140,710.09 $1,440,710.09
Dec/1 $32,500 $27,647.93 $4,852.07 $135,858.02 $1,435,858.02
June/2 $32,500 $27,647.93 $4,852.07 $131,005.95 $1,431,005.95
Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items?
a. FIFO
b. average
c. LIFO
d. specific identification
Answer: Specific identification
Hope it is correct
On November 19, Nicholson Company receives a $25,800, 60-day, 10% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end
Answer:
adjusting entry should be :
Note Receivable $1,806 (debit)
Interest Income $1,806 (credit)
Explanation:
On Issuance of the note the entries recorded are :
Note Receivable $25,800 (debit)
Sales Revenue $25,800 (credit)
At year end, December 31, 42 days would have expired, thus the interest of 42 days accrues on the Note Receivable. Entries are as follows :
Note Receivable $1,806 (debit)
Interest Income $1,806 (credit)
Interest Calculation = $25,800 × 10% × 42/60
= $1,806
In a competitive industry, it takes a fixed ratio of one skilled worker and two unskilled workers to produce a unit of output. If the immigration of unskilled workers lowers the wage of unskilled workers, it will likely
Answer:
The answer is that the ratio is likely the same.
Explanation:
There is no equivalent of how many unskilled worker can replace a skilled worker. Also, it's a fixed ratio of one skilled worker and two unskilled workers to produce a unit of output. Therefore, even though the wage of unskilled workers decreases because of a surplus in immigration of unskilled workers, and assume that the rest is the same, firms won't hire more unskilled workers.
________ is the idea that organizations tend to be more effective when they are structured to fit the demands of the situation.
Answer: Contingency Approach
Explanation: The contingency approach is the idea that organizations tend to be more effective when they are structured to fit the demands of the situation. By fitting to the demands of the situation, it means that they are better equipped with alternatives to be put into operation if needed, especially in the case of emergencies, or in situations where earlier arrangements failed. The approach claims that there is no best way to organize a corporation, to lead a company, or to make decisions and therefore posits that the optimal course of action is contingent (dependent) upon the demands of the situation.
Suppose that Mexico experienced a very severe period of inflation in 1972. As prices in Mexico rose, the demand in the foreign exchange market for Mexican pesos:
Answer:
demand for pesos would fall and supply would rise. their value would decrease as a result
Explanation:
Inflation is a persistent rise in general price level.
When there is high inflation in a country, the demand for the currency would fall because the value of the currency is low. this fall in demand coupled with the excess supply of the currency would lead to a fall in the value of the currency.
An annuity provides for 30 annual payments. The first payment of 100 is made immediately and the remaining payments increase by 8 percent per annum. Interest is calculated at 13.4 percent per annum. Calculate the present value of this annuity.
Answer:
$1423.38
Explanation:
number of payments ( number of years )(n) = 30
first payment = $100
interest calculated at : 13.4 % = 0.134
increment rate : 8 percent = 0.08
we can calculate the present value using this Equation
= (p / (r-g)) * [1 - [(1+g)/(1+r)]^n ]
where :
p / (r-g) = 100 / (0.134 - 0.08 ) = $1852
[1 - ((1+g)/(1+r)]^n ) = (1 - ((1.08/1.134)^30 ) = 0.7686
hence the present value of this annuity = $1852 * 0.7686 = $1423.38
Note :
p ( first principal payment ) = $100
r ( calculated interest ) = 13.4% = 0.134
g ( increment interest ) = 8 % = 0.08
Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours; and Wales 1 hour. Assuming that Widgeon Co. can sell all of the products it can make, what is the maximum contribution margin it can earn per month
Answer:
$3,400
Explanation:
Particulars Bales Tales Wales
Selling price 55 78 32
- Variable costs 20 50 15
Contribution margin 35 28 17
Required hours to process 5 hrs 7 hrs 1 hrs
Contribution margin per hours 7 4 17
Therefore, Widgeon Co. will earn maximum contribution only if it uses all its machine hours for production of wales
Maximum contribution margin = Contribution margin per hour * Number of machine hours
Maximum contribution margin = 17 * 2,000 hours
Maximum contribution margin = $3,400
Assuming that Widgeon Co. can sell all of the products it can make, the maximum contribution margin it can earn per month is $3,400. The difference between the sales price and the variable cost is the contribution margin.
A contribution margin calculates a product's profitability during production. The contribution margin of a business indicates how much income is left over after variable expenditures like raw materials and transportation are subtracted.
A product must have a higher leftover income after variable costs than the business' fixed expenses, such as salaries and insurance, in order to be profitable.
Particulars Bales Tales Wales
Selling price 55 78 32
Less: Variable costs 20 50 15
Contribution margin 35 28 17
Required hours to process 5 hours 7 hours 1 hours
Contribution margin per hours 7 4 17
Widgeon Company will earn maximum contribution only if it uses all its machine hours for production of wales
Maximum contribution margin will be
= Contribution margin per hour × Number of machine hours
= $17× 2,000 hours
= $3,400
Therefore, $3400 is the maximum contribution margin for Widgeon Company.
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Identify the trade-restraining practice that this example demonstrates. Tubifor, Inc. purchases all available imported lumber so it can resell it at a quantity and rate that it prefers.
Answer:
"Pursuit of monopoly power" is the correct solution,
Explanation:
Through a party, the shareholders of such a monopoly have had the authority to adjust rates, eliminate rivals, thereby dominate the competition within the specific geographical region. Antitrust laws in the United States discourage monopolies and whatever other practices which unduly restrict competitor's commerce. The form of trade restriction shown by this illustration is the acquisition of monopoly control.Therefore the answer to the above was its right one.
Item 3Item 3 Cutter Enterprises purchased equipment for $87,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $4,800. Using the sum-of-the-years'-digits method, depreciation for 2018 and book value at December 31, 2018, would be
Answer:
$27,400 and $59,600
Explanation:
The computation of the depreciation expense and the book value using the sum of-the-years'-digits method is shown below:
Depreciation expense is
= (Purchase cost - residual value) × useful life ÷ sum of years
= ($87,000 - $4,800) × 5 years ÷ (5 + 4 + 3 + 2 + 1)
= $27,400
And, the book value is
= Purchase cost - depreciation expense
= $87,000 - $27,400
= $59,600
Strategic management is about formulating strategies that align an organizations internal capabilities with external opportunities while avoiding or minimizing threats. How effective has Mark Parker been as a strategic so far
Answer:
Mark Parker has been very effective as a strategist for the following reasons:
Explanation:
He has been able to keep Nike's brand equity. His policies on HR has generated an effect which translated to increased motivation for his employees to commit to the attainment of the company's objectivesA strategist must be able to make plans and execute them. Nike's strategy is a customer-centric one. Mark was able to, regardless of the economy, ensure that Nike's products were consumer-centric and that the business units in charge of each aspect of Nike's operations were able to deliver their best.
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The BRS Corporation makes collections on sales according to the following schedule: 40% in month of sale 55% in month following sale 5% in second month following saleThe following sales have been budgeted: Sales April $210,000 May $160,000June $150,000 Budgeted cash collections in June would be:______.a. $150,840.b. $158,000.c. $149,000.d. $150,000.
Answer:
Total cash collection= $158,500
Explanation:
Giving the following information:
Cash collection:
40% in the month of sale
55% in the month following sale
5% in the second month following sale
Sales:
April $210,000
May $160,000
June $150,000
Cash collection June:
Sales in cash from June= 150,000*0.4= 60,000
Sales on account from May= 160,000*0.55= 88,000
Sales on account from April= 210,000*0.05= 10,500
Total cash collection= $158,500
examine the difference leadership and management
Answer: LEADERSHIP is about getting to comprehend and believe in the vision you on achieving your goals, while MANAGEMENT is more about administering and making sure the day to day activpities are happening as they should.
Hope it helps you
Explanation:
Normally, the buyer's offer in a commercial transaction takes the form of:____________.
1. a phone call with the parties directly speaking with each other.
2. a personal letter.
3. a purchase order.
4. an acknowledgment form.
Answer:
3. a purchase order.
Explanation:
Normally, the buyer's offer in a commercial transaction takes the form of a purchase order. Commercial transaction refers to the law guiding, regulating or governing business transactions and deals.
A purchase order can be defined as an official document which a buyer send to sellers of goods and services in order to document and have a record of the sale of products and services to be delivered to the buyer at a later date. It allows making order without paying immediately.
Solve the consumer’s problem for John’s optimal demand for Germ-X and Purell. (You should find actual numbers representing the quantity of Germ-X chosen and the quantity of
Answer:
Hello your question is incomplete below is the missing part and the needed diagram
suppose John is shopping and has $20 to spend on hand sanitizer. He can go with Germ-X (G) at $1 per fluid ounce (pG=1), or he can purchase purell (P) at $1.25 per fluid ounce (Pp=1.25). His utility function for the two different hand sanitizers is as follows:
U = G +1.1P
where G and P are measured in fluid ounces.
Solve the consumer’s problem for John’s optimal demand for Germ-X and Purell. (You should find actual numbers representing the quantity of Germ-X chosen and the quantity of purell chosen
ANSWER: The solution = (Germ-x,Purell ) = (20,0).
Explanation:
The consumers problem for John's optimal demand for Germ-x and Purell as seen in the diagram can solved by John going maximizing his utility given the constraint of the budget,
that means that John will purchase/spend the constrained budget of ($20) on Germ-x since the unit price of Germ X is at $1 while Purell's unit price is at $1.25 per fluid ounce
Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one−time−only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials $150 Direct labor 60 Manufacturing support 105 Marketing costs 95 Fixed costs: Manufacturing support 155 Marketing costs 55 Total costs 620 Markup (45%) 279 Targeted selling price $899 For Crandle Manufacturers Inc., what is the minimum acceptable price of this special order?
Answer:
the minimum acceptable price of this special order is $410.
Explanation:
Minimum acceptable price for the special order is the price that gives a Incremental contribution margin of zero or a price that covers all costs related to supporting the special offer.
Since the company has excess capacity, ignore the fixed costs as these are irrelevant for this decision
Costs to Provide for the Special Offer : Minimum acceptable price
Direct materials $150
Direct labor $60
Manufacturing support $105
Marketing costs $95
Minimum acceptable price $410
During August, Boxer Company sells $348,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $11,000 before adjustment. Customers returned merchandise for warranty repairs during the month that used $7,600 in parts for repairs. The entry to record the estimated warranty expense for the month is:
Answer:
Dr Estimated Warranty Liability $8,600
Cr Spare Parts Inventory $8,600
Explanation:
The estimated warranty claim is worth $7,600 which means that the warranty claim must be debited by this amount as it was previously forecasted to be at $11,000 and in this month, the claim was worth $7,600. So decrease in warranty liability is necessary. Furthermore, the Spare Parts Inventory would be credited as the Spare parts would be used to fix the inventory which must be of $7,600 in value.
The double entry to record Warranty Repairs would be as under:
Dr Estimated Warranty Liability $8,600
Cr Spare Parts Inventory $8,600
