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68. Thomas Company offers a five-year warranty on its products. Thomas previously estimated warranty costs to be 3% of sales but in 2025 revised this estimate to 1% due to process and quality control improvements. Thomas reported warranty costs of $75,000 on $2,500,000 in 2023 and $90,000 on $3,000,000 in 2024. Sales revenue for 2025 was $5,000,000. What is the amount of the adjustment to Retained Earnings in 2025 (ignore income tax considerations)?

68. Thomas Company offers a five-year warranty on its products. Thomas previously estimated warranty costs to be 3% of sales but in 2025 revised this estimate to 1% due to process and quality control improvements. Thomas reported warranty costs of $75,000 on $2,500,000 in 2023 and $90,000 on $3,000,000 in 2024. Sales revenue for 2025 was $5,000,000. What is the amount of the adjustment to Retained Earnings in 2025 (ignore income tax considerations)?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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68. Thomas Company offers a five-year warranty on its products. Thomas previously estimated warranty costs to be 3% of sales but in 2025 revised this estimate to 1% due to process and quality control improvements. Thomas reported warranty costs of $75,000 on $2,500,000 in 2023 and $90,000 on $3,000,000 in 2024. Sales revenue for 2025 was $5,000,000. What is the amount of the adjustment to Retained Earnings in 2025 (ignore income tax considerations)?
Transcribed Image Text:68. Thomas Company offers a five-year warranty on its products. Thomas previously estimated warranty costs to be 3% of sales but in 2025 revised this estimate to 1% due to process and quality control improvements. Thomas reported warranty costs of $75,000 on $2,500,000 in 2023 and $90,000 on $3,000,000 in 2024. Sales revenue for 2025 was $5,000,000. What is the amount of the adjustment to Retained Earnings in 2025 (ignore income tax considerations)?
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