Question

Kohl Co. provides warranties for many of its products. The January 1, 2019, balance of the Estimated Warranty Liability account was $50,345. Based on an analysis of warranty claims during the past several years, this year's warranty provision was established at 0.78% of sales. During 2019, the actual cost of servicing products under warranty was $38,893, and sales were $3,682,800. Required: a. What amount of Warranty Expense will appear on Kohl Co.'s income statement for the year ended December 31, 2019? Warranty Expense = Warranty Expense b. What amount will be reported in the Estimated Warranty Liability account on the December 31, 2019, balance sheet? (Amounts to be deducted should be indicated by minus sign.) Estimated Warranty Liability, 1/1/19 balance Estimated Warranty Liability, 12/31/19 balance

Answer 1

a. Calculation of the amount of Warranty Expense will appear on Kohl Co's income statement for the year-end December 31, 2019.
Warranty Expenses = Sales Amount * Warranty Provision
Warranty Expenses = $3,682,800 * 0.78%
Warranty Expenses = $28,726
The amount of Warranty Expense that will appear on Kohl Co's income statement for the year-end December 31, 2019, is $28,726.
b. Calculation of the amount that will be reported in the Estimated Warranty Liability account on December 31, 2019, Balance Sheet.
Particulars	Amount ($)
Estimated Warranty Liability, 1/1/19 Balance	$50,345
Add: Warranty Expense for the year	$28,726
Less: Actual Cost of Servicing Products during the year	-$38,893
Estimated Warranty Liability, 31/12/19 Balance	$40,178
The amount to be reported in the Estimated Warranty Liability Account on December 31, 2019, Balance Sheet is $40,178.