Question

signment 2 Instructions hel Question 4 of 9 Save & Ext suome 10.00 points On December 6, 2017, Norwood Co an office equipment supplier, sold a copier for cash of $18.000 (Cost $12.400) with a two-year parts and labour warranty Based on prior experience. Nonwood expects eventually to our warranty costs equal to the selling price. The fiscal year coincides with the calendar year. On January 20, 2018, the customer returned the oppler for repairs that were completed the same day. The cost of the repairs consisted of $390 for the materials taken from the parts inventory and $530 of labour that was fully paid with cash. These were the only repairs required in 2018 for this copier Required: 1. How much warranty expense should the company report in 2017 for his copier? 2. How much is the warranty ability for this colors of December 31, 2017?

Answer 1

$ 18,000.00 1 Sale prior of copier % expected warranty cost Warranty expense for 2017 $ 1,080.00 2 Estimated warranty liability $ 1,080.00 Warranty liability is equal to the estimated warranty expense, since in 2017 there is no repair is done, hence there will be no reduction in warranty liability. 3 Warranty expense for 2018 Since, company has already booked warranty expense in 2017, hence no warranty expense will be book in 2018 4 Warranty liability at beginning of 2018 Parts cost Labor cost Warranty liability as of december, 31 2018 $ 1,080.00 $ 390.00 $ 530.00 $ 160.00 DR CR Date Particulars 06-12-2017 Cash Sales $ 18,000.00 $ 18,000.00 $ 12,400.00 06-12-2017 Cost of goods sold Merchandise inventory $ 12,400.00 $ 1,080.00 31-12-2017 Warranty expense Estimated warranty liability $ 1,080.00 $ 920.00 20-01-2018 Estimated warranty liability Repair parts inventory Repair labor $ $ 390.00 530.00