At the beginning of 2018, Angel Corporation began offering a two-year warranty on its products. The warranty program was expected to cost Angel 4% of net sales. Net sales made under warranty in 2018 were $180 million. Fifteen percent of the units sold were returned in 2018 and repaired or replaced at a cost of $5.3 million. The amount of warranty expense on Angel's 2018 income statement is: $5.3 million. $7.2 million. $10.6 million. $27.0 million.

Warranty Expense :— It is the cost expected by company for the reparing or replacement of products due to defect in product that are sold to customer. Working Note #:— Estimated Warranty Expense reported on 2018 income statement = Net Sales × Warranty cost % = $180 million × 4% = $7.2 millions Requirement #:— Hence, Warranty expense reported on income statement is $7.2 million Option B is Correct.

Answered: At the beginning of 2018, Angel…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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At the beginning of 2018, Angel Corporation began offering a two-year warranty on its products. The warranty program was expected to cost Angel 4% of net sales. Net sales made under warranty in 2018 were $180 million. Fifteen percent of the units sold were returned in 2018 and repaired or replaced at a cost of $5.3 million. The amount of warranty expense on Angel's 2018 income statement is:

$5.3 million.

$7.2 million.

$10.6 million.

$27.0 million.

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