Frey manufactures high-end whole-home electronic systems. The company provides a one-year...
Question:
Frey manufactures high-end whole-home electronic systems. The company provides a one-year warranty for all products sold. The company estimates that the warranty cost is $225 per unit sold and reported a liability for estimated warranty costs of $7.8 million at the beginning of this year. If during the current year, the company sold 60,000 units for a total of $243 million and paid warranty claims of $9,000,000 on current and prior year sales, what amount of liability would the company report on its balance sheet at the end of the current year? (assume accrual method)
Warranty Liability:
A business's warranty liability, a promise made at the time of sale, may be created to cover any damage or repairs required on the products sold if obligated before the warranty expiry period.
Answer and Explanation: 1
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View this answerThe amount of warranty liability to be shown on the balance sheet is computed as follows:
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Estimated Liabilities: Definition & Types
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Chapter 10 / Lesson 3
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