Bill\'s Bargain Vacuums warrants all of its products for one full year against a

Question

Bill's Bargain Vacuums warrants all of its products for one full year against any defect in manufacturing. Sales for 2017 and 2018 were $758,000 and $871,000, respectively. Bill's Bargain Vacuums expects warranty claims to run 4.5% of annual sales. Bill's paid $30,150 and $38,290, respectively, in 2017 and 2018 in warranty claims.

Compute Bill's warranty expense for 2017 and 2018.

      Compute the balance in estimated warranty payable on December 31, 2018, assuming the January          1, 2017, balance in the account was $2,980.

Explanation / Answer

Bill's warranty expense for 2017=758000*4.5%= $34110 Bill's warranty expense for 2018=871000*4.5%= $39195 Balance in estimated warranty payable on December 31, 2018=2980+34110-30150+39195-38290= $7845 Credit balance

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