During 2019, Salton Co. introduced a new line of machines that carry a three-year warranty against...
During 2019, Salton Co. introduced a new line of machines that carry a three-year
warranty against manufacturer’s defects. Based on industry experience, warranty
costs are estimated at 1% of sales in the year of sale, 2% in the year after sale,
and 3% in the second year after sale. Sales and actual warranty expenditures for
the first three-year period were as follows:
Sales
Actual Warranty Expenditures
2019
$ 1,400,000
$ 26,000
2020
1,000,000
40,000
2021
1,400,000
90,000
$3,800,000
$156,000
What amount should Salton report as a liability at December 31, 2021?
Homework Answers
| Total Warranty expense for 3 years | 228000 | =3800000*(1%+2%+3%) |
| Less: Actual Warranty Expenditures | 156000 | |
| Warranty liability at December 31, 2021 | 72000 |
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