westworld Inc, sells vehicles with multi-year warranties that it records in one warranty payable account. At...
westworld Inc, sells vehicles with multi-year warranties that it records in one warranty payable account. At January 1, 2017 the beginning balance in warranty payable account was $400,000. Vehicles sales during 2017 were $8,500,00 and warranry costs were estimated at 5% of sales. During 2017 $278,000 of claims were paid. On december 31, 2017 what is the ending balance in warranty payable?
Homework Answers
Warranty expense of the year 2017 = 8,500,000 x 5% = $425,000
Ending warranty payable = Beginning warranty payable+ Warranty expense - Claims paid
= $400,000+$425,000-$278,000
= $547,000
Therefore, the balance in warranty payable as at Dec. 31, 2017 is $547,000.
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