During Year 2, Going-Going-Gone sold 100 hot air balloons for $4,000 each. The balloons carry a five-year warranty for defects. It is estimated that repair costs will average 4% of the total selling price. The warranty liability at the beginning of the year was $42,000. Only $11,000 in claims was actually incurred during the year to honour warranties. There is no indication that previously recorded estimate of warranty liability has been misstated. Refer to Going-Going-Gone. What is the balance in the warranty liability at the end of the Year 2? O $37,000 O $31,000 O $16,000 O $47,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
During Year 2, Going-Going-Gone sold 100 hot air balloons for $4,000 each. The balloons carry a five-year warranty for defects. It is estimated that repair costs will
average 4% of the total selling price. The warranty liability at the beginning of the year was $42,000. Only $11,000 in claims was actually incurred during the year to
honour warranties. There is no indication that previously recorded estimate of warranty liability has been misstated.
Refer to Going-Going-Gone. What is the balance in the warranty liability at the end of the Year 2?
O $37,000
O $31,000
O $16,000
O $47,000
Transcribed Image Text:During Year 2, Going-Going-Gone sold 100 hot air balloons for $4,000 each. The balloons carry a five-year warranty for defects. It is estimated that repair costs will average 4% of the total selling price. The warranty liability at the beginning of the year was $42,000. Only $11,000 in claims was actually incurred during the year to honour warranties. There is no indication that previously recorded estimate of warranty liability has been misstated. Refer to Going-Going-Gone. What is the balance in the warranty liability at the end of the Year 2? O $37,000 O $31,000 O $16,000 O $47,000
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Accounting for Guarantees and Warranties
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education