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lovethepirk
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| Posted: 27 Nov 2009 at 00:28 | IP Logged
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I do understand that say you had some service contracts sold in December of 2007 that you will only get 40% of that worked on because there's only 12 months left until the end of 2008.
So I did a spreadsheet by month and it matters when you slot the monthly sales of the 500,000. If you claim them end of month you will have a little residual left over at end of 2008 for the January 2007 sales, verses if you claim those sales at Jan 1 2007 the entire month sales will be eliminated in 2 years.
I came up with like 605,000 vs 650,000 ish on the two. I guess we could break this down to daily sales and get a more refined answer.
I don't understand why we are dividing by 2 now?
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Future CPA
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| Posted: 27 Nov 2009 at 01:01 | IP Logged
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See if this explanation makes any sense...You have sold the warranties evenly throughout the year. So let's say you have sold $50,000 in warranties every month. This totals to $600,000 a year. The warranty claim is 30% in year 1.
30% of 600,000 = $180,000
The first hunch will be to say $180,000 is the warranty claims in the first year. For each warranty to accrue 30% in warranty claims, it must be outstanding for 12 months. So we must look at it month wise.
Sold in January: Outstanding for 12 months.
Sold in February: Outstanding for 11 months.
Sold in March: Outstanding for 10 months.
......
You get the point. So really anything sold after January hasn't been outstanding for 12 months. So you divide the entire year by 2, and it averages our warranty claims out.
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lovethepirk
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| Posted: 27 Nov 2009 at 01:05 | IP Logged
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Thanks...
I guess you can get as detailed and nasty with this calculation as you want but just using 2 as a divider is good enough ;)
Thanks...
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Future CPA
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| Posted: 27 Nov 2009 at 01:09 | IP Logged
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Yes, just remember to divide it by 2. Honestly, I didn't know why I divided by 2 until now. I would just always divide things by 2 in BEC and in FAR and get the right answer. Now when you asked about this, I actually tried to figure out why...So yes, just remember the divider, and you're good to go :)
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lovethepirk
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| Posted: 27 Nov 2009 at 01:27 | IP Logged
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I ran it on excel assuming daily sales, the formulas got a bit confusing lol but I got it set up right...
the answer was 650,684 left. If I remember doing it monthly the answer was 605,0000 and 650,000 depending if you insert the sales beg of month or at the end.
So 630,000 is close enough
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Topic: Unearned Revenue
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