Calculate the Net Income from a Jeep Sale in 20X4
What is the net income recognized in 20X4 from the sale of a Jeep according to the given data?
Calculating Net Income for a Jeep Sale in 20X4
Sales Price: $500,000
Cost of Goods Sold: $350,000
Extended Warranty Sales Price: $31,000
Estimated Costs for Warranty:
- Standard Warranty: $5,000
- Extended Warranty: $20,000
Actual Cost of Warranty Work Performed:
- Warranty Cost in 20X1: $3,000
- Warranty Cost in 20X2: $3,000
- Warranty Cost in 20X3: $13,000
- Warranty Cost in 20X4: $14,000
First, let's calculate the total warranty revenue:
Total Warranty Revenue: $31,000 + $5,000 = $36,000
Next, we calculate the total warranty costs incurred:
Total Warranty Costs Incurred: $3,000 + $3,000 + $13,000 + $14,000 = $33,000
Now, we can calculate the net income or loss recognized in 20X4:
Net Income or Loss: ($500,000 - $350,000) + $36,000 - $33,000 = $153,000
However, we need to subtract the warranty costs incurred in 20X4 from this calculation to get the net income recognized in 20X4:
Net Income in 20X4: $153,000 - $14,000 = $139,000
Therefore, the net income recognized in 20X4 from the sale of a Jeep is $7,000.