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

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

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During Year 3, the Seahawks Inc. sold 150 dune buggies for $4,000 each. The dune buggies carry a five-year warranty for defects. Estimates are that repair costs will average 4% of the total selling price. The warranty liability at the beginning of the year was $14,000, and $20,000 in claims was actually incurred during Year 3 to honour warranties. Refer to Seahawks Inc. What is the balance in the warranty liability at the end of the Year 2? O $24,000 O $18,000 $14,000 O $38,000
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