n 2020, Bonita Industries began selling a new line of products that carry a two-year warranty...
n 2020, Bonita Industries began selling a new line of products
that carry a two-year warranty against defects. Based upon past
experience with other products, the estimated warranty costs
related to dollar sales are as follows:
| First year of warranty | 3% | |
| Second year of warranty | 5% |
Sales and actual warranty expenditures for 2020 and 2021 are
presented below:
| 2020 | 2021 | |||
| Sales | $748000 | $1055000 | ||
| Actual warranty expenditures | 49000 | 71000 |
What is the estimated warranty liability at the end of 2021?(assume
the accrual method)
Homework Answers
Estimated warranty liability at the end of 2021:
= [($748,000 + $1,055,000) X 8%] - ($49,000 + $71,000)
= $24,240
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n 2020, Bonita Industries began selling a new line of products
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