Question

Western warrants most products it sells against defects in materials and workmanship for a period of a year.
Based on their
experience with previous product introductions, warranty costs are expected to approximate 2% of sales.
A warranty liability
of $39 million was reported at December 31, 2017. Sales of warranted products during 2018 were $2,100 million and actual
warranty expenditures were $40 million.
Determine the appropriate means of reporting this situation.

Answer 1

Answest page=0 Wangianty costs are expected to approximate = 244 of sales. hasslanty liability - $39 million warranty expenditure = $40 million. warsranted produt during 2018 - $ 2100 million contingency for wat ronties should be accrued. Wasanty expen Se = (@•%*$2100 million). 1 million The contingency for en x $ 100 million-I milion = 100 100 million- ! million 0.02 * $ = 42 000 000 - 1000000 = 41009ooo Estimated warranty liability - 41000000 The liability at december 31, 2014, is reported as $ 41 million. I