During 2018, P started manufacturing and selling a new product with a three-year warranty. Based upon past experience with similar products, P estimated the following warranty costs as a % of sales dollars: First year of warranty 2.25% Second year of warranty 2.75% Third year of warranty 3.50% Sales and actual warranty expenditures for 2014 and 2015 were as follows: 2018 2019 Sales $940,000 $1,005,000 Actual warranty expenditures 12,900 47,100 Prepare the entry P made as of 12-31-18 to accrue for its estimated warranty liability. Prepare the entry P made during 2018 to account for actual warranty expenditures. Assume P fixed the warranty problem/issue by spending money and using spare parts in equal amounts. What was P’s estimated warranty liability amount at the end of 2019?
During 2018, P started manufacturing and selling a new product with a three-year warranty. Based upon past experience with similar products, P estimated the following warranty costs as a % of sales dollars:
First year of warranty 2.25%
Second year of warranty 2.75%
Third year of warranty 3.50%
Sales and actual warranty expenditures for 2014 and 2015 were as follows: 2018 2019
Sales $940,000 $1,005,000
Actual warranty expenditures 12,900 47,100
- Prepare the entry P made as of 12-31-18 to accrue for its estimated warranty liability.
- Prepare the entry P made during 2018 to account for actual warranty expenditures. Assume P fixed the warranty problem/issue by spending money and using spare parts in equal amounts.
- What was P’s estimated warranty liability amount at the end of 2019?
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