In 2025, Oriole Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon experience with other products, the estimate warranty costs as a percentage of sales revenue are as follows: First year of warranty 3% Second year of warranty 5% Sales revenue and actual warranty expenditures for 2025 and 2026 are presented below: Sales revenue Actual warranty expenditures 2025 $755000 $1051000 72000 2026 42000

In 2025, Oriole Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon experience with other products, the estimate warranty costs as a percentage of sales revenue are as follows: First year of warranty 3% Second year of warranty 5% Sales revenue and actual warranty expenditures for 2025 and 2026 are presented below: Sales revenue Actual warranty expenditures 2025 $755000 $1051000 72000 2026 42000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

In 2025, Oriole Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon experience with other products, the estimated
warranty costs as a percentage of sales revenue are as follows:
First year of warranty.
3%
Second year of warranty 5%
Sales revenue and actual warranty expenditures for 2025 and 2026 are presented below:
Sales revenue
Actual warranty expenditures)
2025
$755000
42000
2026
$1051000
72000
What is the estimated warranty liability at the end of 2026? (assume the accrual method)

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