What is the warranty expense for 2020? What is the warranty expense for 2021? What is the warranty liability on December 31, 2021 before adjustment? What is the warranty liability on December 31, 2021 after adjustment?
Use the information for the next four (4) questions. In 2020, Pluto Company started selling new computer that carried a 2-year warranty against defects. Based on the manufacturer's recommendations, the entity estimated warranty cost as a percentage of sales. The sales and warranty repairs are made evenly during the year.
|
First year of warranty |
3% |
|
Second year of warranty |
9% |
|
|
|
|
Sales and actual warranty repairs are as follows: |
|
|
|
|
2020 |
2021 |
|
Sales |
7,500,000 |
10,500,000 |
|
Actual warranty repairs |
150,000 |
375,000 |
|
|
|
|
What is the warranty expense for 2020?
What is the warranty expense for 2021?
What is the warranty liability on December 31, 2021 before adjustment?
What is the warranty liability on December 31, 2021 after adjustment?
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