Asked by Sarah-Cate Parker on Jun 29, 2024
Verified
Refer to Exhibit 13-5.The amount of warranty expense for 2010 is
A) $ 80, 000
B) $120, 000
C) $140, 000
D) $240, 000
Estimated Liability
Estimated Liability refers to a potential financial obligation that can be reasonably estimated but its exact value or timing is uncertain.
Warranty Expense
Costs incurred by a company to repair, replace, or compensate for faulty products during the warranty period.
Net Sales
The revenue from goods or services sold after deducting returns, allowances for damaged or missing goods, and any discounts allowed.
- Understand thoroughly the handling of warranties in accounting across varied accounting methodologies.
Verified Answer
ZK
Zybrea KnightJul 05, 2024
Final Answer :
B
Explanation :
The warranty expense for 2010 is calculated as 4% of annual net sales, which is 4% of $3,000,000 = $120,000. This is the amount recognized as an expense for the year, independent of the adjustments to the warranty liability account.
Learning Objectives
- Understand thoroughly the handling of warranties in accounting across varied accounting methodologies.