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QUESTION 6 A company sells its product subject to a warranty that covers the cost of...

QUESTION 6 A company sells its product subject to a warranty that covers the cost of parts for repairs during the six months after the date of sale. Warranty costs are estimated to be 6% of sales. During the month of June, the company performed warranty work using $12,000 worth of parts for the warranty repairs. The total sales for June were equal to $450,000. If the Estimated Warranty Liability account had a credit balance of $10,000 on May 31, what is the account balance at June 30?

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Answer #1

Account balance at June 30

= 10,000 + (450,000*6%) - 12,000

= 10,000 + 27,000 - 12,000

= 25,000
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