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What is the estimated warranty liability at the end of 2026? (assume the accrual method)

What is the estimated warranty liability at the end of 2026? (assume the accrual method)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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)
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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