For the question below the right answer is C,however My answer is B.Not sure how

Question

For the question below the right answer is C,however My answer is B.Not sure how expense for 2004 is 150k and not 30 k.

Crenshaw Corporation sells widgets. Each widget carries a multi-year warranty.
Crenshaw estimates the cost of warranty work to be 3% of current sales. 20X4 sales was $5 million and $30,000 was spent on warranty work during 20X4. The balance in Estimated Warranty Liability at 12-31-X3 was $70,000. What is the balance in Estimated Warranty Liability at 12-31-X4 and the balance in Warranty Expense for 20X4, respectively?



a. $150,000; $ 30,000

b. $190,000; $ 30,000

c. $190,000; $150,000

d. $120,000; $150,000

e. None of the above

Explanation / Answer

Begining balance in Warranty Liabilty account     $70,000
Add : Estimated Warranty expense for 2004      $150,0001
Less : Spent on warranty work during 2004         $30,0002
Ending Warranty liability                              $190,000
                                                                    ==========
1Estimated Warranty liability for 2004  
   $5,000,000 x 3%     $150,000

2Spent on warranty work against liability for 2003 $70,000 and / or against current year's (20x4) liability.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.