In 2020, Dare Company began selling a new calculator that carried a two-year warranty against defects. The entity projected the estimated warranty cost as a percent of sales. First year of warranty 4% Second year of warranty 10%
In 2020, Dare Company began selling a new calculator that carried a two-year warranty against defects. The entity projected the estimated warranty cost as a percent of sales. First year of warranty 4% Second year of warranty 10%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
In 2020, Dare Company began selling a new calculator that carried a two-year warranty
against defects.
The entity projected the estimated warranty cost as a percent of sales.
First year of warranty 4%
Second year of warranty 10%
Sales and actual warranty repairs were:
2020 2021
Sales 5,000,000 9,000,000
Actual warranty repairs 200,000 560,000
Required:
1. Analyze the estimated warranty liability on December 31, 2022 to ascertain if adjustment is necessary. The sales and warranty repairs are made evenly during the year.
2.Prepare the adjustment to correct the estimated warranty liability on December 31,2022
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