QUESTION 1 Partially correct 6.00 points out of 8.00 P Flag question Analyzing a

Question

QUESTION 1 Partially correct 6.00 points out of 8.00 P Flag question Analyzing and Computing Accrued Warranty Liability and Expense Waymire Company sells a motor that carries a 60-day unconditional warranty against product failure. From prior years' experience, Waymire estimates that 3% of units sold each period will require repair at an average cost of $100 per unit. During the current period, Waymire sold 70,000 units and repaired 1,000 units (a) How much warranty expense must Waymire report in its current period income statement? (b) What warranty liability related to current period sales will Waymire report on its current period-end balance sheet? (Hint: Remember that some units were repaired in the current s 0

Explanation / Answer

SOLUTION

Answer 1

(A) Warranty expense Waymire must report is-

= 70,000 units * 3% * $100

= $210,000

(B) Warranty liability related to current period -

= $210,000 - ($100 * 1,000 units)

= $210,000 - $100,000

= $110,000

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