PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLES参考.ppt

Many companies offer bonuses to employees, and many of the bonuses depend on net income. To illustrate, assume that an employer offers a bonus to its employees equal to 5% of the company’s annual net income (to be equally shared by all). The company’s expected annual net income is $210,000. To calculate the amount of the bonus, we can set up the basic bonus equation which states that your bonus (B) is equal to 5% of the net income minus the bonus. Solving the equation, we find that the bonus is $10,000. Once the bonus has been calculated, the company will debit the Employee Bonus Expense account, and credit the Bonus Payable, for $10,000. When the bonus is paid to you, the company will debit, or eliminate, the Bonus Payable balance, and credit Cash. Many products sold are covered by a warranty. A warranty is a seller’s obligation to replace or correct a product (or service) that fails to perform as expected within a specified period. Most new cars, for instance, are sold with a warranty covering parts for a specified period of time. To comply with the full disclosure and matching principles, the seller reports the expected warranty expense in the period when revenue from the sale of the product or service is reported. The seller reports this warranty obligation as a liability, although the existence, amount, payee, and date of future sacrifices are uncertain. This is because such warranty costs are probable and the amount can be estimated using, for instance, past experience with warranties. To illustrate, a dealer sells a used car for $16,000 on December 1, 2011, with a maximum one-year or 12,000-mile warranty covering parts. In this case, a dealer’s experience shows that warranty expense averages about 4% of a car’s selling price, or $640 ($16,000 x 4%). The dealer records the estimated expense and liability related to this sale with a journal entry to debit Warranty Expense for $640 and to credit Estimated Warranty Liability for $640. With this entry, the