In 20X1, Stevens Corp. began a new product line of wearable technology that carries a 24-month warranty against manufacturer defects. Based on industry experience, Stevens expects warranty costs to be an amount equal to approximately 9% of total sales dollars. During 20X1, new sales of this technology totaled $3,000,000. The costs incurred to satisfy warranty claims in 20X1 was $90,000. Required: Answer the following two questions. Question #1: What should Stevens report as the "Warranty Expense" balance on its 20X1 income statement? Answer: Question #2: What should Stevens report as the "Warranty Liability" balance on its balance sheet at 12/31/X1?
In 20X1, Stevens Corp. began a new product line of wearable technology that carries a 24-month warranty against manufacturer defects. Based on industry experience, Stevens expects warranty costs to be an amount equal to approximately 9% of total sales dollars. During 20X1, new sales of this technology totaled $3,000,000. The costs incurred to satisfy warranty claims in 20X1 was $90,000. Required: Answer the following two questions. Question #1: What should Stevens report as the "Warranty Expense" balance on its 20X1 income statement? Answer: Question #2: What should Stevens report as the "Warranty Liability" balance on its balance sheet at 12/31/X1?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In 20X1, Stevens Corp. began a new product line of wearable technology that carries a 24-month warranty against manufacturer defects. Based on industry experience, Stevens expects warranty costs to be an amount equal to approximately 9% of total sales dollars.
During 20X1, new sales of this technology totaled $3,000,000. The costs incurred to satisfy warranty claims in 20X1 was $90,000.
Required: Answer the following two questions.
Question #1: What should Stevens report as the "Warranty Expense" balance on its 20X1 income statement?
Answer:
Question #2: What should Stevens report as the "Warranty Liability" balance on its
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