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 O $30000. O $144480. O $83520. O $30480. 2026 $1051000 72000 What is the estimated warranty liability at the end of 2026? (assume the accrual method)
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 O $30000. O $144480. O $83520. O $30480. 2026 $1051000 72000 What is the estimated warranty liability at the end of 2026? (assume the accrual method)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
O $30000.
O $144480.
O $83520.
O $30480.
2026
$1051000
72000
What is the estimated warranty liability at the end of 2026? (assume the accrual method)
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