In 2019, the Magtag Company sold 16,000 ovens. Magtag estimated that 14% of the machines would require repairs under the two-year assurance-type warranty at an average cost of $60. During 2015, Magtag had an actual outlay of $62,000 for repairs under warranty. Magtag uses the GAAP approach of accruing warranty expense (and the related liability) in the year of the sale. 19. Refer to Exhibit 9-2. What amount should the company report for estimated liability under warranties at the end of20l9? a. $72,400 b. $62,000 c. $48,000 d. $84,000
In 2019, the Magtag Company sold 16,000 ovens. Magtag estimated that 14% of the machines would require repairs under the two-year assurance-type warranty at an average cost of $60. During 2015, Magtag had an actual outlay of $62,000 for repairs under warranty. Magtag uses the GAAP approach of accruing warranty expense (and the related liability) in the year of the sale. 19. Refer to Exhibit 9-2. What amount should the company report for estimated liability under warranties at the end of20l9? a. $72,400 b. $62,000 c. $48,000 d. $84,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In 2019, the Magtag Company sold 16,000 ovens. Magtag estimated that 14% of the machines would require repairs under the two-year assurance-type warranty at an average cost of $60. During 2015, Magtag had an actual outlay of $62,000 for repairs under warranty. Magtag uses the GAAP approach of accruing warranty expense (and the related liability) in the year of the sale.
19. Refer to Exhibit 9-2. What amount should the company report for estimated liability under warranties at the end of20l9?
a. $72,400
b. $62,000
c. $48,000
d. $84,000
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