Concord Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first year after sale-2% of sales; second year after sale-4% of sales; and third year after sale-5% of sales. Sales and actual warranty expenditures for the first three years of business were: Sales Warranty Expenditures 2021 $750,000 $15, 900 2022 1,010,000 46,000 2023 1,017,000 80,000 (a) Calculate the amount that Concord should report as warranty expense on its 2023 income statement and as a warranty liability on its December 31, 2023 SFP using the assurance - type warranty (expense - based approach). Assume that all sales are made evenly throughout each year and that warranty expenditures are also evenly spaced according to the rates above. Warranty expense Warranty liability
Concord Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first year after sale-2% of sales; second year after sale-4% of sales; and third year after sale-5% of sales. Sales and actual warranty expenditures for the first three years of business were: Sales Warranty Expenditures 2021 $750,000 $15, 900 2022 1,010,000 46,000 2023 1,017,000 80,000 (a) Calculate the amount that Concord should report as warranty expense on its 2023 income statement and as a warranty liability on its December 31, 2023 SFP using the assurance - type warranty (expense - based approach). Assume that all sales are made evenly throughout each year and that warranty expenditures are also evenly spaced according to the rates above. Warranty expense Warranty liability
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Concord Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects.
Based on experience, the estimated warranty costs related to dollar sales are as follows: first year
after sale-2% of sales; second year after sale-4% of sales; and third year after sale-5% of sales.
Sales and actual warranty expenditures for the first three years of business were: Sales Warranty
Expenditures 2021 $750,000 $15, 900 2022 1,010,000 46,000 2023 1,017,000 80,000 (a)
Calculate the amount that Concord should report as warranty expense on its 2023 income
statement and as a warranty liability on its December 31, 2023 SFP using the assurance - type
warranty (expense -based approach). Assume that all sales are made evenly throughout each
year and that warranty expenditures are also evenly spaced according to the rates above.
Warranty expense Warranty liability
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