Ace Appliances Inc. offers a 12-month warranty on all its appliances. Ace Appliances estimates that one appliance out of each 1000 sold will require warranty service and that the average cost per warranty claim is $300. Ace sold 30,000 appliances during 2020. The estimated warranty liability at the beginning of the year was $ 4,500. Claims of $7,000 were actually paid during the year to honour warranties. Ace Appliances has a December 31 year-end. 1. Calculate the estimated warranty expense for Ace Appliances for 2020 2. Calculate the balance of the Estimated Warranty Liability account at December 31, 2020.
Ace Appliances Inc. offers a 12-month warranty on all its appliances. Ace Appliances estimates that one appliance out of each 1000 sold will require warranty service and that the average cost per warranty claim is $300. Ace sold 30,000 appliances during 2020. The estimated warranty liability at the beginning of the year was $ 4,500. Claims of $7,000 were actually paid during the year to honour warranties. Ace Appliances has a December 31 year-end. 1. Calculate the estimated warranty expense for Ace Appliances for 2020 2. Calculate the balance of the Estimated Warranty Liability account at December 31, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ace Appliances Inc. offers a 12-month warranty on all its appliances. Ace
Appliances estimates that one appliance out of each 1000 sold will require warranty service and that the average cost per warranty claim is $300. Ace sold 30,000 appliances during 2020. The estimated warranty liability at the beginning of the year was $ 4,500. Claims of $7,000 were actually paid during the year to honour warranties. Ace Appliances has a December 31 year-end.
1. Calculate the estimated warranty expense for Ace Appliances for 2020
2. Calculate the balance of the Estimated Warranty Liability account at December 31, 2020.
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