A new product introduced by Wilkerson Co. carries a 2-yearwarranty against defec

Question

A new product introduced by Wilkerson Co. carries a 2-yearwarranty against defects. The estimated warranty cost related tosales: Year of Sale.............3%.................Year afterSales..............5% Sales and Actual Warranty Expenditures for the year's endedDec. 31, 2007 and 2008. ....................Sales.............Actual WarrantyExpenditures 2007.........800,000.........................20,000 2008......1,000,000.........................70,000 What amount should Wilkerson report as its estimated liabilityas of Dec 31, 2008 Please show me how to calculate this problem. Thank you inadvance. A new product introduced by Wilkerson Co. carries a 2-yearwarranty against defects. The estimated warranty cost related tosales: Year of Sale.............3%.................Year afterSales..............5% Sales and Actual Warranty Expenditures for the year's endedDec. 31, 2007 and 2008. ....................Sales.............Actual WarrantyExpenditures 2007.........800,000.........................20,000 2008......1,000,000.........................70,000 What amount should Wilkerson report as its estimated liabilityas of Dec 31, 2008 Please show me how to calculate this problem. Thank you inadvance.

Explanation / Answer

Hi Navitech! i believe you were wrong from: Dec 31, 2008 Product warrantyexpense...............70,000 .................................Product WarrantyPayable...............70,000 1,000,000 * 3% = 30,000 ----800,000 * 5% = 40,000 Dec 31, 2008 Product warrantyPayable...............74,000 ..............................Supplies.............................................74,000

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